Also known as a personal guarantor certificate or a legal advice certificate they provide certification that a person has obtained independent legal advice about the risks and obligations associated with being a third-party guarantor to someone else’s financial lending. Such a guarantee usually requires that you provide the lender with an indemnity also.
They are almost always required when a bank lends a company money or when a trustee is named as the principal borrower. We also see a lot more parents or other family members being a personal guarantor to their children’s home loan. In all these types of arrangements the lender will require an independent solicitor to certify that the guarantor has received legal advice about what they are committing themselves to.
The “independent” part refers to the lawyer who is giving the legal advice being independent from the lender or borrower of the loan or financial arrangements. The lawyer must certify that they have: 1. Given you the required legal advice; and 2. That you understood it. It is only after the lawyer provides you with the legal advice and you understand it, should you decide to give a personal guarantee and indemnity.
Here a few basic things to consider when making your decision.
A guarantee and indemnity is for the benefit of the lender and the borrower.
As guarantor, you only stand to lose if you are required to pay out because the borrower defaults.
You only benefit you may enjoy is a sense of gratitude to helping a company or family member.
A guarantee and indemnity will be in place during the entire lending period (usually 30 years for a home loan).
As time passes, your obligations to guarantee the borrower’s repayments and the agreement to indemnify the lender from loss is as strong on day 10,950 as it was on day one!
Many guarantors are family members of the borrower, usually marital or parental.
In the event of a breakdown in the family relationship the guarantee and indemnity does not stop, it will continue despite divorce, separation or breakdown.
A guarantee and indemnity cannot be revoked by you, without the lenders consent, in writing, and signed.
The likelihood is, the lender will never consent to release you as personal guarantor unless the full loan is paid out first or arrangements are made for another personal guarantor to take over.
The guarantee and indemnity you give is personal. It is backed (or secured) by every property, savings, money or other assets you might own now, or you later acquire in the future.
If the lenders call on you, they may take everything to recover their money and their losses.
A guarantee and indemnity will survive your death (usually) and your Estate may then become liable to pay monies owing under the guarantee.
The above are just some of the important aspects of giving a guarantee and indemnity for another’s benefit.
There are, of course, positives; you might get a sense of happiness helping a family member buy a home or start a business; or it might be the only way a bank will lend a company you are involved with borrow money to help the business thrive and grow (which you might benefit from financially).
So, what do you need to do to get Black Bear Legal to give you legal advice and get a certificate?
The lender will send you a number of documents in the mail (or increasingly by email) addressed to you as the personal guarantor.
Once you have all those documents you need to read them yourself carefully. They should consist of;
1. The actual loan documents between the borrower and the lender.
2. The lenders standard terms and condition (if any).
3. The deed of guarantee and indemnity, in your name.
4. The lenders draft version of the independent solicitor’s certificate.
Then, simply contact us and let us know you need our advice.
We will ask you to get a copy of all the documents to us so we can read over them before setting up an appointment to give you the advice you need.
That appointment normally takes around 45 minutes to 1 hour and must be attended by you only.
After receiving our advice we’ll provide you with an independent solicitor’s advice certificate and you’ll be ready
We charge a fixed fee for providing the legal advice and independent solicitors certificates of $385 (Inc GST) for advising one guarantor of a loan.
If there are two guarantors to the same loan documents, then we charge $495 (Inc GST) for advising both (which must be done separately).
If the loan or financial arrangements are particularly complex or involve multiple parties then we may need to provide you with an estimate of fees after receiving the documents and before we give the advice.
Unfortunately, we have had to close our physical office during the Covid-19 crisis which has caused extraordinary disruption with all staff needing to work from home (as best they can).
As a father with small children that both suffer with respiratory illnesses, we are keeping our children home. It will be very difficult for our office to run effectively for the foreseeable future and I appreciate your patience at this time.
Given the difficulties, we are temporarily limiting our home office 'core hours' to 10.00am to 2.00pm, Monday to Friday for phone calls and 'ordinary' working hours.
Please do not expect that we will be able to address any enquiry or phone call outside of those times and we will get back to you and address your enquiry as soon as possible.
We hope you appreciate the situation we are in and I certainly apologise for any inconvenience or delay this may cause.
If your email or enquiry is genuinely urgent please call me on my mobile 0420 308151 and I will answer if I am free but otherwise leave a voicemail alerting me to the urgency of the matter.
We wish you well and hope you stay safe during this unprecedented time.