Because of very poor lending practices back in the late 1980s, there was a lot of litigation during the 1990s which saw the courts overturning some loan arrangements made by the banks. This was particularly happening where the banks had not ensured that the borrower, or any one of them, or a guarantor, was not fully made aware of what the loan arrangement entailed.
As a result of those cases, an agreed process was set up between the lenders and the Law Society of NSW to ensure that the borrowers and guarantors received independent legal advice on the loan documentation.
The requirement for independent legal advice usually arises where a borrower or a guarantor may be seen as 'vulnerable'.
It might arise where:
What is involved in getting independent legal advice?
In providing proper advice, we need to read through the loan documents and then meet with you to discuss the documents and your reasons for entering the transaction.
If you are then satisfied with proceeding with the arrangement, you have to sign a statutory declaration that swears that you have received independent legal advice from us.
That statutory declaration then needs to be handed to the lender. We also keep a record of the issues discussed with you.
We certainly do recommend obtaining independent financial advice separate to the independent legal advice.
We cannot provide financial advice to you. This includes the fact that we cannot advise you as to whether it is financially beneficial to you, or otherwise, for you to go ahead and sign the loan documents. An accountant or a financial advisor should be consulted by you for that purpose.
You can read more about Independent Legal Advice in our blog “What is independent legal advice and why do I need it?”