Solicitor’s Certificate

We frequently get questions about witnessing guarantor or loan documentation. Frequently, the person making the inquiry is unsure of what this entails and has only been told by their bank or broker that they need a “solicitor’s certificate,” but they are not given any other information, such as a reason why this is necessary or that the cost of obtaining this does not come cheaply.

Why is a solicitor’s certificate required?
The solicitor’s certificate’s main function is to demonstrate to the lender that the client (customer) fully comprehends the legal significance of the document they are signing. There have been instances where a loan or guarantee has been thrown out because it was discovered that the borrowers or guarantors did not understand what they were signing.

Why is the cost so high?

The cost of witnessing loan or guarantor documents is an expensive exercise which can cost hundreds of dollars (more in some cases).  The reasons for this are:

• The solicitor must understand why the customer requires the loan or guarantee
• The solicitors must review all relevant loan or guarantor documents priorto the customer’s appointment with them
• The solicitor must check that the solicitor’s certificate provided by the lender complies with rule 11 of the Legal Profession Uniform Legal Practice (Solicitors) Rules 2015.
• At the appointment, the solicitor must thoroughly go through the documents with the customer and make sure they understand the risks involved and their obligations under the loan or guarantee
• If the customer does not speak English then an interpreter’s service will need to be arranged at additional costs
• The solicitor must verify the customer’s identity
• The solicitor must obtain a form of acknowledgement in the form approved by the Law Institute of Victoria (rule 11)
• The solicitor will have to make a detailed file note as to their meeting with the customer in case a customer claims (and they occasionally do) they were not properly advised at the time of signing the loan or guarantee documents
• The solicitor may also have to send the documents directly to the lender
• Occasionally the solicitor may need to be involved in the final draw-down of the loan although this is less common

The aforementioned typically takes two hours of work. Alternative lending options do exist, though, such as equity release loans, smaller commercial loans, or guarantees, where the paperwork is substantially more involved and the solicitor must do a lot more work.

When deciding whether or not to offer a solicitor’s certificate, the solicitor must manage their risk. As a result, many businesses have a stringent no walk-ins policy and may only offer a solicitor’s certificate to recent or current clients. The customer’s age also has an impact; a lawyer will need to take into account factors like the client’s capacity and vulnerability.