Independent legal advice (ILA) for mortgages
What ILA is, when lenders require it, what it costs, and how to avoid paying for it twice.
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In short
- What it is
- Advice from an independent solicitor, so you understand a legal commitment before you sign it.
- Who needs it
- Usually anyone giving a personal guarantee for company borrowing. Also on some home mortgages: joint borrower sole proprietor, guarantor and equity release.
- Why
- The lender makes it a condition of the loan. It isn’t required by law for every mortgage.
- Cost
- About £200 to £1,000 per person, in our experience.
- Time
- Often about 4 to 5 working days. Faster may cost more.
- From us?
- No. We’re a mortgage broker and don’t give legal advice, but we’ll tell you what your lender needs.
What is independent legal advice?
If you’re arranging a limited company buy-to-let mortgage, a bridging loan, a commercial mortgage or development finance, your lender may require you to get independent legal advice (ILA) before the transaction can complete. For many property investors it feels like another unexpected cost in an already costly process.
We come across ILA requirements regularly when arranging mortgages and finance for limited companies, particularly where directors or shareholders have to give personal guarantees. It means extra cost and paperwork, but it’s there to protect people who are taking on personal legal responsibility for company borrowing.
This guide explains what ILA is, why lenders require it, what it typically costs and how you may be able to reduce the cost.
Why do mortgage lenders require it?
When a limited company takes out a mortgage or other property finance, the lender will often require one or more directors, shareholders or other individuals to give a personal guarantee (PG). A personal guarantee is a legally binding commitment that can make you personally responsible for the company’s borrowing if the company doesn’t meet its obligations. The mortgage is in the company’s name, but the guarantee can expose you personally.
Because of that, lenders commonly require anyone giving a personal guarantee to get independent legal advice from a suitably qualified solicitor, so that they understand:
- what the personal guarantee is
- their legal responsibilities under it
- the possible financial consequences if the company defaults
- when the lender could pursue them personally
- the risks of giving the guarantee
Once the advice has been given, the solicitor will usually complete the confirmation the lender needs. Not every personal guarantee needs ILA by law, but lenders frequently make it a condition of lending.
When it comes up
When might you need independent legal advice?
Most often with limited company borrowing, but also on some home mortgages where someone takes on responsibility without owning the property, or where it’s your home that’s at stake.
Company and investment borrowing
Buy-to-let
Limited company buy-to-let
Buying or refinancing an investment property through a limited company, lenders often require personal guarantees from the directors or other relevant people. Depending on the lender, they may need ILA before the mortgage can complete.
Buy-to-let mortgagesBridging
Bridging loans
Bridging is often used to buy a property that needs refurbishment or development, or to complete quickly. Where the bridge is through a limited company, lenders may require personal guarantees from directors or shareholders, and ILA with them.
Bridging loansCommercial
Commercial mortgages
Businesses buying or refinancing commercial property can come across ILA requirements too, particularly where the lender wants directors or others to guarantee the borrowing personally.
Development
Development finance
Development finance can involve large borrowing and extra legal obligations. Depending on how it’s structured, lenders may require personal guarantees and ILA from the people involved.
Home mortgages
JBSP
Joint borrower sole proprietor
A family member, often a parent, joins the mortgage to help with affordability but isn’t on the deeds. They’re responsible for the payments without owning any of the home, so lenders usually require them to take independent legal advice first.
What JBSP meansGuarantor
Guarantor mortgages
A family member guarantees the mortgage payments, sometimes backed by their savings or their own home. Lenders usually require the guarantor to take independent legal advice, so they understand they could have to pay.
What a guarantor mortgage isEquity release
Lifetime mortgages
Lenders that are members of the Equity Release Council require you to have independent legal advice from your own solicitor before a lifetime mortgage can complete.
Equity release, explainedILA requirements vary between lenders and transactions. We’ll identify any requirements as early as possible.
Need clarity on ILA?
Speak with one of our advisors. We’ll tell you what your lender needs, who needs advice, and when, so it doesn’t hold up completion.
How much does independent legal advice cost?
It varies a lot. We’ve seen ILA quotes from about £200 to £1,000, depending on the provider and the circumstances. These are figures from our experience, not fixed market rates. The cost can depend on:
- the solicitor giving the advice
- how complex the transaction is
- the number and type of documents
- how urgently it’s needed
- how many people need advice
ILA is usually charged per person, not per mortgage. If two directors both need it, expect two fees. Find out the cost early so it’s in your budget.
An illustration from the range we’ve seen. Your solicitor will quote the actual fee.
Does every director or shareholder need ILA?
Lenders may require each person giving a personal guarantee to get independent legal advice. That commonly includes the directors, and can include major shareholders or other signatories, depending on the lender. If a company has two directors and both give personal guarantees, each may need ILA.
Both may be able to use the same independent solicitor, but each person’s circumstances and obligations have to be considered properly, and the solicitor must be satisfied there’s no conflict of interest and that the arrangement meets the lender’s requirements. Being a director or shareholder doesn’t automatically mean you need ILA: the lending conditions and legal documents decide who does.
A common frustration
Why you might need ILA twice
Say you’re buying a property that needs refurbishment before it can be refinanced onto a standard buy-to-let mortgage. The plan has two stages.
Stage 1: buying with bridging finance
You buy the property through your limited company with a bridging loan. The bridging lender requires the directors to give personal guarantees and get independent legal advice. You arrange the ILA, pay the fees and complete.
Stage 2: refinancing onto buy-to-let
Once the work is done, you refinance the bridge onto a longer-term limited company buy-to-let mortgage. The new lender may also require personal guarantees and fresh independent legal advice, so you could pay for ILA twice on the same project.
It can feel unnecessary, but the two loans are different arrangements with potentially different legal obligations, so advice given for the bridge won’t necessarily satisfy the buy-to-let lender.
Can you save money if you need ILA twice?
Possibly. If you already plan to buy with bridging finance and then refinance onto a buy-to-let mortgage, talk to your independent solicitor about both at the outset, and ask whether they’d discount the fee for handling both. They may already have done the identity checks, have your documents and know your circumstances from the first one. Fresh advice and paperwork may still be needed, and there’s no guarantee of a discount, but it’s worth asking.
Our tip: planning a bridge-to-let? Budget for two ILAs, and talk to your solicitor about the likely cost before you complete the purchase.
Can my conveyancing solicitor give the ILA?
Often not. In many cases the solicitor giving independent legal advice has to be separate from the solicitor acting on the mortgage transaction. If your conveyancer is handling the purchase and the mortgage documents, they may not be independent enough to give the ILA your lender needs, so you may need another solicitor just for this. It depends on the lender, the transaction and any conflicts of interest, so check the solicitor can meet the lender’s requirements before you book.
Where can I arrange independent legal advice?
Any suitably qualified independent solicitor who provides ILA. We don’t have an exclusive arrangement or formal referral relationship with any ILA provider. A number of our clients have used ILA.co.uk, and their experience has generally been positive. We mention it as a possibly useful option rather than a formal recommendation or endorsement, and you’re free to choose your own solicitor. Before booking, confirm they can meet your lender’s requirements.
Before you book: a quick checklist
- Have the lender’s ILA form or certificate and the documents you’re signing, such as the personal guarantee.
- Check the solicitor is independent of the lender’s solicitor and of the solicitor acting on the transaction, if your lender requires that.
- Ask whether a video appointment is acceptable to your lender, or whether you need to attend in person.
- Have your photo ID and proof of address ready.
- Ask for the fee per person, and a combined fee if you’ll need ILA again for a refinance.
- Book as soon as the lender confirms it’s needed, so it doesn’t hold up completion.
Need clarity on ILA?
Speak with one of our advisors. We’ll go through your lender’s conditions with you and what needs arranging, and when.
Independent legal advice: your questions
How long does independent legal advice take?
It depends on the solicitor, their availability and the transaction. Some services can arrange it within about four to five working days, though that isn’t guaranteed, and faster appointments may cost more. If you’re working to a tight completion date, leaving ILA to the last minute can cause problems, so arrange it as soon as you know your lender needs it. Planning ahead gives you more choice of solicitors, can keep the cost down and reduces the risk of delays.
Can independent legal advice be done online?
In some cases, yes. Some solicitors offer remote ILA appointments, including by video call. Whether that’s acceptable depends on the lender and the documents involved, and you may still need extra identity checks, a witness or physical signatures. Before you book an online appointment, check that the provider can meet your lender’s instructions.
Is independent legal advice compulsory?
It isn’t automatically required by law for every mortgage or personal guarantee. But where a lender makes ILA a condition of the loan, it will generally need to be done before completion, so don’t assume it can be waived. Your mortgage advisor can explain what the lender needs; your solicitor can advise on the legal side.
Can Barrett Mortgages provide independent legal advice?
No. We’re a mortgage broker and we don’t give legal advice. We arrange mortgages and property finance, including limited company buy-to-let, bridging, commercial mortgages and development finance, or refer you to trusted specialists where that’s more appropriate. Where a lender requires ILA, we’ll help you understand the mortgage conditions and what needs arranging, and when.
Need clarity on ILA?
Speak with one of our advisors. Leave your name and number and a CeMAP-qualified advisor will call to explain what your lender needs, who needs advice and when.
Darren, Beth, Ben & JakeYour advisors, at our office in Poole
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