A Solicitor’s Certificate is a certificate of Independent Legal Advice to a borrower or guarantor in relation to a loan. In providing legal advice, a Solicitors Certificate confirms to a lender that a borrower or guarantor has received independent legal advice and understands the potential liabilities and risks involved in signing the security documents.
Often lenders will indicate that the security documents are straight-forward and only need a “signature” from a solicitor. This is not the case. In providing legal advice, solicitors are governed by laws and regulations not only in relation to the Credit Code affecting banks but also by the Uniform Law and the guidelines provided by the Law Institute of Victoria.
The objective of the Legal Profession Uniform Legal Practice (Solicitors) Rules 2015 (“Solicitors Rules”) is to regulate aspects of legal practice by solicitors. Rule 11 of the Solicitors Rules imposes specific rules on solicitors in relation to loan and security documents. Solicitors are not permitted to sign off on security documents if they are not in the form prescribed by Rule 11.
The relevant rules are as follows:
Although lenders indicate the documents are straight forward, a solicitor cannot simply “sign off” or rely on the documents provided by a lender if they do not meet the requirements of the legislation or regulations.
Our firm has a strict policy in relation to providing Solicitor’s Certificates. We require at least forty-eight (48) hours to review the documents between when they are received by our office to when the advice is provided.
We require you to provide us with a copy of all of the security documents. The security documents can be delivered to our office in hardcopy or they can be emailed in soft copy. It is important to ensure all documents are provided so that there is no delay in receiving the advice.
We require at least forty-eight (48) hours between receiving the security documents to when we meet with you to provide the advice. Within the forty-eight (48) hours we review the documents and provide a written letter of advice prior to our meeting.
The meeting will be conducted in person at our office. Any person receiving advice is required to bring their identification documents so that the solicitor providing the advice can verify their identity. Prior to the meeting we will discuss which identity documents to bring with you to meet the standard required by the Solicitors Rules.
During the meeting we will provide detailed legal advice regarding the security documents. Only the person receiving the advice, the solicitor providing the advice and an assisting solicitor will be present in the room. Another person is not permitted to be present in the room as we need to ensure the advice is independent and you are not being forced, pressured or influenced to sign the security documents.
Advice regarding security documents should be completed and signed in person. Whilst legislation was passed to allow documents to be signed electronically this does not apply to solicitors certificates. Our firm has implemented Covid-19 safe practices if you are required to attend our office for a meeting in relation to a Solicitors Certificate.
A solicitor not only needs to ensure that the client understands the risks associated with signing the documents but also that the documents contain the terms the client agreed to.
If a client is not properly advised, the following risks may arise:
1. The security property may be incorrectly recorded, or there may be an additional security property the client was not aware of.
2. The client may not be aware of the consequences of signing the document. It is common for guarantors to be unaware that a lender does not need to demand payment from the borrower first and can demand the guarantor pay the money back first.
3. There could be an error on the security documents as to the interest rates. If the interest rates and terms of payment are not correct the borrower may be locked into terms they did not agree to or were not aware of.
No. A solicitor can only provide legal advice and cannot provide any financial advice. A Solicitors Certificate does not provide advice on the viability of a transaction in which the borrower is undertaking, cannot comment on the borrower’s ability to make the required payments to the lender, or a guarantor’s ability to make payment to the lender. We strongly recommend always seeking financial advice before signing security documents.
Rule 11.8 of the Solicitors Rules states that a solicitor acting for the lender must not aid, abet, counsel or procure any other solicitor to provide evidence otherwise than in conformity with this rule. Therefore if the lender’s legal representative puts pressure on a form to be signed that does not meet the standards of the Solicitors Rules, they themselves will be breach of the Solicitors Rules.
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