Independent Legal Advice (ILA) is normally a requirement of a lender for secured lending i.e. property related work.
There are various different types and which one is relevant to your situation will depend on what type of borrowing you require and the Lender’s requirements. All Lenders are different and use different forms and have different requirements but ultimately they all (more or less) have the same meaning and effect. There will normally be lawyers acting on the borrowing but this advice must be independent from that i.e. from a different law firm. It is therefore going to be an additional expense but a necessary one.
House or other property in joint names with new borrowing in a Business Name secured by charge or second charge over the property
This is potentially the most fiddly and expensive and is otherwise known as “Etridge” advice (after the case when the requirement became clear for the lenders. The 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 has any involvement in the business or not and general knowledge of the day to day affairs of the business.
House in sole name with other partner/spouse in occupation
This is also Etridge advice and so will take a bit longer for the ILA meeting and be a little more costly.
House in sole name with other partner/spouse/adult in occupation
The ILA in this situation will be in connection with any rights of occupation that might exist and any lender will want to see those rights 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 – normally for directors of a Limited Company or members of an LLP
The same lawyer can normally give ILA to more than one director but normally this will involve a separate meeting with each director. It is likely that 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. It is then up to the directors to “equalise” liability between themselves. This is a 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. We can supply a specific agreement between the directors prepared at the same time as the PG is signed that will give a specific agreement to achieve this.
Call us on or complete the contact form.