Why has my bank asked me to get independent legal advice?

You’re finalising a loan, mortgage or guarantee when your bank or lender tells you that you need to obtain independent legal advice before the documents can be completed.

It can feel like an unexpected extra step — particularly if you’re keen to get the transaction finalised. But there is an important reason for it.

Independent legal advice helps ensure that you understand the documents you are signing, the obligations you are taking on and the potential consequences if things don’t go according to plan.

What is independent legal advice?
Independent legal advice, often shortened to ILA, is advice provided by a solicitor who is acting independently of the bank, lender and other parties involved in the transaction.

The solicitor’s role is not simply to witness your signature.

They will explain the nature and effect of the relevant documents, your obligations under them and the significant legal risks you should understand before deciding whether to sign.

Once the required advice has been provided, the solicitor may be asked to sign an Independent Legal Advice Certificate confirming that the advice has taken place.

Why does my bank require an ILA certificate?
Banks and other lenders may require independent legal advice where a transaction places significant obligations or risks on someone who may not directly benefit from the loan.

A common example is a guarantee.

You might be guaranteeing a loan for your spouse, family member, company or another business. Depending on the terms of the documents, that could expose you or your assets to significant financial consequences if the borrower fails to meet their obligations.

The lender therefore wants confirmation that you have had an opportunity to receive independent advice about what you are agreeing to before you sign.

An ILA certificate provides evidence that the relevant legal advice has been given.

Does needing independent legal advice mean something is wrong with the loan?
Not at all. Being asked to obtain independent legal advice does not, by itself, mean there is a problem with the transaction.

It is commonly a requirement of the lender's documentation or lending process, particularly where guarantees, mortgages, security arrangements or third-party interests are involved.

The important point is that the solicitor providing the advice is independent. Their role is to explain your position and the legal effect of the documents — not to persuade you to proceed with the transaction.

What happens during an ILA appointment?
Before your appointment, the solicitor will generally need to receive and review the relevant documents.

During the appointment, the solicitor will discuss those documents with you and explain matters such as:

• the obligations you are agreeing to;

• the effect of any guarantee, mortgage or other security;

• circumstances in which the lender may be able to enforce its rights;

• the potential consequences for you and your assets; and

• other significant risks arising from the documents.

You will also have an opportunity to ask questions about anything you do not understand.

The purpose is to ensure that you have the information you need to make your own decision about whether to sign.

Why can't the bank's lawyer give me the advice?
Because the advice needs to be independent.

A lawyer acting for the bank or another party to the transaction cannot necessarily provide the independent advice required about your own legal position.

Your solicitor needs to be able to advise you independently about the obligations and risks you are assuming.

What should I bring to my appointment?
The exact requirements will depend on your circumstances and the lender's documents.

Generally, you should provide the solicitor with the complete set of documents requiring advice before your appointment, allowing sufficient time for them to be reviewed.

You may also need to bring appropriate identification and any other documents requested by the solicitor.

If you are unsure what is required, it is best to contact the law firm before attending.

Can Barratt Commercial Law help with an ILA certificate?
Barratt Law assists clients in Perth who have been asked by a bank or lender to obtain independent legal advice in relation to lending, guarantee and security documents.

We can review the relevant documents, meet with you to explain their legal effect and the associated risks and, where appropriate, provide the required Independent Legal Advice Certificate.

ILA appointments are conducted face-to-face in Perth.

If your bank, lender or broker has told you that you need an ILA certificate, contact Barratt Law and send us the relevant documents so we can advise you on the next steps.

Need an Independent Legal Advice Certificate?
Contact Barratt Commercial Law to arrange an appointment with a Perth solicitor