Independent Legal Advice (ILA)
Requests for Independent Legal Advice (ILA) tend to mainly originate from requirements related to the financial services sector and associated lending/borrowing applications. ILA is not entirely tied into lending but a large proportion of the approaches we receive do come from that direction.
In this blog update we look at some of the areas where rhw can provide ILA to clients who need our advice. As stated already, ILA is often a requirement of a lender for secured lending i.e. property related work .
What you and the lender require in terms of ILA varies. Which one is relevant to you depends on what type of borrowing you require. Lenders requirements vary and they tend to use different forms but the core objectives of the exercise have the same meaning and effect. You may already have lawyers acting on your borrowing application but the independent legal advice must come from a different law firm. It will be an additional expense but a necessary and usually unavoidable one that should provide peace of mind.
Some property related ILA requirements are as follows:
A house or other property held in joint names with new borrowing in a Business Name secured by charge or second charge over the property
This is known as ‘Etridge’ advice after a key legal case that established the requirement for ILA going forward in similar circumstances. The legal advice will need to be given to the spouse or partner of the business owner being the second owner of the property in joint names. The extent of the advice depends on whether the person requiring the advice is deeply involved in the business or just has a peripheral interest, as it were.
House in sole name with other partner/spouse in occupation
As above, this is also ‘Etridge’ advice and so any meeting to discuss the ILA can take longer than just a quick summary.
House in sole name with other partner/spouse/adult in occupation
This is about rights of occupation. The ILA will explore any rights that may exist. The interest from the lender is to ensure that any existing rights are waived. This will not normally affect the situation between the property owner and the occupier only between the occupier and the Lender.
ILA for Bank Guarantee
Advice normally provided to the Directors of a Limited Company or members of an LLP (Limited Liability Partnership)
More than one director can receive ILA from the same lawyer, but that advice will have to be delivered via separate meetings. The bank will require the PG (Personal Guarantee) liability from multiple directors to be joint & several. This means simply that the Lender will be able to pick and choose which director(s) to pursue if things go wrong down the line. It is then up to the directors to ‘equalise’ liability between themselves. This could be a potential problem between the directors (Particularly the director who may have paid out more than his or her “share”) but the Lender will not be involved in this.
Contribution Agreement
in the unfortunate event that one or more director(s) have been required to pay more than their “share” to the Lender, it may be possible under the general law to get this balanced out between the directors collectively. rhw can supply specific agreements between the directors, prepared at the same time as the PG is signed, that will give a specific agreement to achieve this.
If you would like more information in relation to Independent Legal Advice (ILA), contact Nick Richardson at rhw either via email or call 01483 302000
