Is 'independent legal advice for secured lending' necessary?

[baptiste]

We are looking to take out a bank loan secured against our property, we have been advised by the bank that we need to obtain 'independent legal advice for secured lending against a property for debt consolidation'.

 

I've just spoken to a solicitor who basically said that the purpose of this is just to take the responsibility away from the bank, and that that it's largely for their benefit.

 

Is this the case, should we get it anyway?

[baptiste]

Can nobody provide any advise on this please?

[BazzaS]

We are looking to take out a bank loan secured against our property, we have been advised by the bank that we need to obtain 'independent legal advice for secured lending against a property for debt consolidation'.

 

I've just spoken to a solicitor who basically said that the purpose of this is just to take the responsibility away from the bank, and that that it's largely for their benefit.

 

Is this the case, should we get it anyway?

 

Is the bank loan for a business?

 

Typically this arises when Person A asks Person B to take a mortgage secured on a property which Person B has equity / an interest in, to support Person A's business.

 

If the business folds, the bank will want the property it is secured on. If Person B can demonstrate they were placed under "undue influence" then rescission of the mortgage can be imposed : the mortgagee is left pursuing Person A only, with no rights to the property the mortgage had been secured on (and for an unsecured loan only against Person A, rather than one with any security)

This is why "it is for the bank's benefit"!, and why they will likely insist on it ......

 

(The technicalities are in RBS v Etridge (No. 2), a House of Lords case from 2002, where if the transaction "cries out for explanation" the bank needs to show all parties were aware of the nature of the mortgage and its risks ..... The bank explaining the risks might be seen as not adequate, so "independent legal advice" gives the presumption that the risks were adequately explained)

 

"Independent" also means "not acting for Person A" as well as "not acting for the bank", so they only have Person B's interests in mind, and they may insist on Person A and the bank's staff not being present when the independent advisor speaks to Person B.

[baptiste]

Thank you.

 

The loan is not for a business, it's for renovation and clearing our overdrafts.

[BazzaS]

Thank you.

 

The loan is not for a business, it's for renovation and clearing our overdrafts.

 

But you are "Person A", and there is a "Person B" whose equity in property would be at risk?.

 

The same principle applies. They are ensuring recession due to claims of undue influence (claims by Person B of undue influence over them) can't be invoked.

[baptiste]

Thank you, that's exactly the info I needed.