Filter news
Do I Need Independent Legal Advice?

Do I Need Independent Legal Advice?


Expert view

In some personal or business transactions you may need to take independent legal advice. Campbell McKellar from our corporate commercial team explains more about this.

Independent legal advice (sometimes known as an “Etridge Letter” after a key court case) is when you have to contact a Solicitor or Chartered Legal Executive for a separate meeting about a document you need to sign. They will discuss the meaning of the document and explain the risks if you sign it. You must meet with the solicitor or legal executive alone so you are not influenced and they need to be completely separate from the transaction, with no involvement at all.

Why Do I Need It?

The whole idea behind independent legal advice is to protect you from signing any document before you understand the risks of the transaction.  Your independent advisor will have to sign a certificate confirming that they provided you with the relevant advice and that you signed the document in front of them without any signs that you were being forced into it.

Here’s a typical example of when independent legal advice is required:

A business owner is seeking a loan for their business.  The Bank wants some security in case the loan doesn’t get repaid. Because the business isn’t established, the bank wants a charge over the business owner’s family home. He shares this home with his wife and children. If his business is in a position that it can’t repay the loan, the Bank can repossess the family home to recover the money owed.

This means that the business owner’s wife who has nothing to do with the running of the business could lose her family home.  Because of the seriousness of this situation, the Bank will need both owners’ signatures on the document giving these rights to the Bank.

The Business owner is entering into this arrangement on his own free will. He knows all about the loan, and has control over how the money is spent. He won’t normally need independent legal advice. His wife on the other hand is completely removed from the business and is vulnerable.

The wife could be the only person in the way of the business owner receiving a much needed loan. This could mean that the business owner is pressurising his wife to agree. You can see why independent legal advice is necessary in this situation.

Independent legal advice not only protects the wife in this scenario, but it also means that the Bank has a stronger case if she later argues that she was forced into signing the document. They can argue that the independent legal advice that she receives means she cannot make that claim.

Banks demanded independent legal advice as a requirement because of the number of cases in the Courts where it argued that they couldn’t rely on the loan arrangements because one of the parties had been pressurised to sign. This is called “undue influence”.

What Types of Transactions Need Independent Legal Advice and Do I Have To Pay?

Your bank or lender should make it clear if you need independent legal advice. But the most common types of arrangements which I deal with in the corporate and commercial team are:

  • If the bank requires a legal right (charge) to a property co-owned with someone else
  • If you are personally guaranteeing a loan on behalf of someone else or a company (even if you are the owner of the company!)

You’ll often be asked to pay a fee for independent legal advice. This will cover the advisor’s time with you and preparation to make sure that you fully understand the arrangement.

It’s important to remember that this advice is not a formality, but a serious legal requirement to make you aware of your future risks.

Generally speaking any independent legal advice must be provided in person and not over the phone. A face to face meeting makes sure that the person they’re speaking is not being unduly influenced by anyone else in the room. But due to technological advancements, you can receive the advice by video calls such as Skype or FaceTime. Remember though, the use of this technology will be at the respective Bank’s discretion.

The team here at Meade King can discuss your independent legal advice requirements with you.

In some circumstances, if you’ve already instructed us to deal with a transaction, we can provide independent legal advice within the fee already agreed.

This would be done by another suitably qualified solicitor or legal executive who has not been involved in the transaction.

Call us now on 0117 926 4121 or make a Free Online Enquiry.