Solicitor’s Certificates

In this article we will explore solicitors’ certificates – what are they, when are they required, what is involved and how do you get yours completed as quickly and painlessly as possible.

What is a Solicitor’s Certificate?

Put simply, a solicitor’s certificate (as it is understood in the world of property) is a certificate (in the approved format) signed by a solicitor whereby the solicitor certifies that the solicitor has:

• explained the mortgage documents to the client;
• identified the client; and
• been advised by the client that the client understands the general nature and effect of the loan documents.

These certificates are usually required by lenders (banks and non bank lenders) when the obligations of the borrower are guaranteed by a third party. The third party may be a director and / or shareholder of a corporate borrower / trust borrower or an unrelated party – such as a parent guaranteeing the debt of a child. It is possible for the lender to require a solicitors certificate for a borrower – but this is less common.

Lenders now regard the provision of these certificates as a standard requirement after a number of court decisions over past decades where guarantors have issued court proceedings complaining that they didn’t understand the nature and effect of the guarantes they signed. Banks lend mortgage funds at relatively low margins and aren’t in the business of not getting their money back. Hence they changed the rules – after all the Golden Rule is that he / she that has the gold makes the rules!

The benefit to the lender of these certificates is that, if the guarantor claims not to understand the guarantee, the lender can sue the solicitor. Either the guarantor is lying (and the solicitor’s file proves this) or the solicitor has been negligent and the bank can recover from the solicitor’s indemnity insurer. This is the classic game of heads I win, tails you lose that the banks do like to play.

However, the solicitors’ indemnity insurers don’t like this risk at all. So solicitors are now required to comply with some very stringent requirements in providing these certificates. My professional indemnity insurer has issued checklists of requirements and if we don’t work through these checklists and keep detailed file notes we may be held to not only have been negligent – but likely won’t be covered by our insurer if something goes wrong.

What is Involved?

The professional conduct rules that govern solicitors now prescribe that there is an authorised format for solicitors’ certificates. It is misconduct for a solicitor to sign a certificate in a different format or provide any similar sort of assurance to a lender. It is also misconduct for a lender’s solicitor to ask another solicitor to sign a certificate in a different format.

As an example of this, it would be misconduct for me to send an email to a lender advising the lender that I had met with the guarantor and explained the documents to them before the documents were signed. If I want to provide that sort of assurance I must use the approved form of certificate – or I can say nothing!

Simplifying things, there are three basic elements to a solicitor’s certificate. The solicitor is required to certify:

• The general nature and effect of the documents were explained. Key issues will include interest rates, payments, loan terms and default clauses. To do this properly, the solicitor needs an opportunity to review the documents prior to meeting the client. This review process can be quicker where loan documents are in a standard form prepared by a major bank. The review process will be slower if the documents are non-standard or issued by a private lender as the likelihood of non-standard provisions exists;
• the solicitor has formally verified the identity of the client(s). This means that the solicitor has been provided with sufficient points of original ID, has inspected them, compared photos to the persons in the room and kept a copy. Often this is as simple as bringing a copy of your drivers licence and passport to the meeting. However, some people don’t have these documents or may have changed their names requiring additional documents; and
• That it appears that the guarantor understands the general nature and effect of the documents and is signing them voluntarily and without undue pressure. This can cause issues where the guarantor speaks limited English or suffers from medical issues that limit their comprehension. Issues can also arise where there are two guarantors who have different interests and hence a conflict of interest may arise.

The standard format also makes it clear that we are not providing financial advice and makes provision for an interpreter if required.

Minimising the Pain

If you need a solicitor’s certificate signed, here are some suggestions that should help you get this process completed with a minimum of inconvenience:

• Don’t think this is a formality that can be attended to in five minutes over video link. We are required to review the documents properly, explain them properly and verify your identity in person. These requirements are imposed upon us y regulation and aren’t negotiable!
• Do provide a (full) copy of the loan documents by email as soon as possible. We can then review them before you arrive and ensure that we can provide the required explanations as efficiently as possible.
• Do bring your ID – Typically a current passport and drivers licence will suffice. However, if you have changed your name, have foreign or expired documents or don’t have some documents this may require additional thought.
• Be aware that some lenders require that we take photographs of you with your ID and / or signing the documents;
• Do ask your broker or the lender about other lender requirements. Examples include whether you are required to get financial advice (which solicitors can’t provide), whether titles or other documents need to be submitted to the lender or the lender has other requirements.
• Do consider whether conflicts arise where there are multiple guarantors. It may be that each guarantor needs independent advice. Identifying this issue early will save time and frustration later on.
• Do understand that a solicitor’s certificate requires a great deal of work in the background. Opening a file, reviewing loan documents, meeting with the client and witnessing the documents does take time. Again, the consequences for a solicitor that doesn’t do this carefully can include having their right to practice law taken away.

Lewis O’Brien & Associates regularly provides solicitor’s certificates for existing and new clients. Understanding that these certificates often need to be provided in a hurry we try to expedite the process as much as we can! However, whilst we try to be efficient it doesn’t mean we can cut corners.

To contact us, ask for a quote and / or arrange a solicitor’s certificate – please click here.

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