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Here at Mepstead Lawyers we are also frequently engaged for fixed price Solicitors Certificates, Reverse Mortgages and/or bank guarantees sometimes referred to as Solicitors Certificates. We can provide urgent certificates and after-hours meetings and advice on certificates. We have a strong customer focus on providing these services at fixed and competitive prices. Increasingly financial institutions and credit providers are insisting that you obtain a solicitor’s certificate. Regrettably this is the cost of “doing business” if you wish to obtain the loan.

Why does it cost so much for the solicitor to provide a solicitor’s certificate?

The potential monetary risk of providing the solicitor’s certificate by the lawyer is equal to the amount of loan or money being borrowed or alternatively being guaranteed in the transaction plus interest and recovery costs. If the solicitor has not properly advised the customers in relation to the above issues, it is possible that they (or the bank) could join the solicitor in any proceedings alleging the bank had not properly advised the customers of the full implications of the loan or guarantee. In other cases, they could be sued by the banks when they attempt to shift the blame if it is found that customers were not fully informed of or did not properly understand their liabilities under the loan or the guarantee. It is for this reason that solicitors must be very careful about providing advice to their clients and completing a solicitor’s certificate for the benefit of the banks or the lenders.

The loan documents and deed of guarantee must be very carefully perused by the solicitor, as well as all of the ancillary documents associated with the loan (i.e., the letter of offer, schedules, standard terms and conditions etc.). In many cases there is urgency attached to having the mortgage documents and guarantee signed because it is provided shortly prior to the settlement date. This adds to the pressure and risk associated with providing the solicitor’s certificate. If things go wrong with a loan, the people who borrow the money quite often blame others for not advising them properly.

How can lawyers help with a Solicitor’s Certificate?

If a solicitor’s certificate is not carefully considered and appropriate advice given to the clients, the lawyers face the risk of being involved in expensive litigation in circumstances where the only person benefiting from the certificate are the banks.
The professional indemnity insurers for lawyers are very strict in relation to their requirements for solicitors providing these certificates.

It’s a lot more than I just need a simple solicitor’s signature

A solicitor’s certificate is usually a lengthy and complex legal agreement and is difficult to provide proper advice and gain a client’s ‘informed consent’ to those documents in one appointment – and yet the banks require a lawyer to formally ‘certify’ the clients fully understand those documents. It is little wonder many lawyers refuse to provide this service, particularly to “walk in clients”.

Banks and other lenders require a solicitor’s certificate in order to shift the risk of the loan and or the guarantee involved over to the customer rather than bear the risk themselves.
This has come about because of cases decided in the courts, such as Commercial Bank of Australia v Amadio [1983] HCA 14, where some loans and guarantees have been set aside due to findings that the borrowers or the persons providing the guarantee did not fully understand or appreciate the consequences of signing the loan documents. The Amadio case developed the test of unconscionable conduct. In this case the Amadio’s secured their son’s business loan and when the business failed, the Commercial Bank sought to enforce the guarantee. The Court found the bank had taken unconscientious advantage of the Amadio’s, who spoke very little English and had minimal business experience, by failing to advise them as to their son’s already shaky financial circumstances and failure to advise them to seek independent advice

Why do the banks require a solicitor’s certificate to be provided?

A more recent example of this was in National Australia Bank Ltd v John Albert Rose [2016] VSCA 169 wherein the Court dismissed an appeal by NAB against a lower court decision which allowed Mr Rose to abandon his guarantor liabilities. The judge found the banking manager in this case had failed to advise Mr Rose that he should seek independent legal advice on the guarantor documents. This decision allowed Rose to walk away from liabilities which were in excess of $3.8 million dollars.

In Fast Fix Loans v Mladenko Samardzic [2011] NSWCA 19 an elderly parent provided a guarantee for a loan of their adult child (mum and dad bank) and offered their unencumbered family home as security for the loan. The elderly parents mortgaged their home in order to secure their son’s borrowings. In this case the Court considered were that the parents were not legally represented.
The Court found a solicitor had translated the solicitor’s certificate to them but failed to provide advice regarding the effect of signing the Guarantee. Fortunately, in this case, the Court found the guarantee was unjust and released the parents from their obligations. However the stress and expense of the litigation in order to have the guarantee set aside should not be underestimated.

A solicitor’s certificate can vary from bank to bank and other financial institutions but basically the solicitor must certify that:

  1. The people obtaining the loan fully understand and agree with the terms and conditions of the loan agreements and security that is being offered for the loan (as well as receiving and understanding all of the related documents);
  2. That if there is a default, the bank can sell up the property that they have offered as security for the loan to recover the unpaid monies plus default interest and any other costs of the default (i.e., taking possession and selling the property etc.);
  3. That the clients are aware of the repayments the loan agreement will require them to pay, that they have the income to service these repayments, and that they have obtained appropriate advice from their accountant and/or financial advisors;
  4. If there is a guarantee, the person providing the guarantee understands that if there is a default under the loan, whatever security they have provided under their guarantee (most of the guarantees relate to all their assets) may be sold by the bank to recoup the amount owing under the loan plus any default interest and other costs that they incur in the process.