For anyone asked to act as a guarantor for a home loan or business loan, the phrase “independent legal advice” is almost unavoidable.
Financiers insist upon it, lawyers inwardly groan at the added risk, and clients frequently walk away wondering what, if anything, was actually achieved, aside from another bill to pay.
What Is Independent Legal Advice, Really?
While those navigating the guarantor process might think their solicitor is simply there to witness a signature, the reality is more fraught. The process of obtaining independent legal advice requires a solicitor to sit down with the guarantor client, often in rushed circumstances, and formally advise about the risks of being a guarantor of a loan. A solicitors certificate is then signed, stating they have given this advice and that the client appeared to understand it.
Banks are near uniform in their insistence on this process. It’s marketed as protection for the borrower or guarantor, but the underlying benefit often runs in another direction: it is primarily the bank that is protected.
How Did We Get Here?
The ILA requirement arose from court cases like Commercial Bank of Australia Ltd v Amadio and Garcia v National Australia Bank Ltd, where guarantees were set aside because the signatory did not truly understand their obligations.
The response was simple: require a certificate of independent legal advice to shrink the bank’s risk, shifting much of the responsibility onto the advising solicitor.
Real-Life Business and Home Loan Guarantor Scenarios
The Family Guarantor:
A parent agreed to be their child’s business loan guarantor. Later, when the business fails, the parent is shocked to find that the bank can seek repayment from them. Their defence that “I didn’t realise what I was signing” is largely neutralised if a solicitor’s certificate exists.
In these cases, the bank relies on the solicitor’s certificate—and the client is left with little recourse.
The Reluctant Spouse:
A spouse, unsure about being a guarantor on a loan by their partner or their partner’s business entity, but pressured by their partner, attends a hastily organised meeting mere hours before settlement. Despite voicing concern, they sign—believing the matter is just a formality. If things sour, the fact that the guarantor spouse has been given independent legal advice means the spouse guarantor is on the hook if things go sour with the partner’s business.
Misunderstood Loan Guarantor Risks
Some clients assume their liability is capped or conditional, when in fact the guarantee is unlimited and joint and several. Genuine independent legal advice makes these risks explicit, but without due diligence, many clients leave the room with false confidence that “someone else will be responsible” if a default ever happens.
A System for the Banks. A Risk for Lawyers. A Burden for Clients
Often, the independent legal advice process is viewed as a formality. The client pays for advice on documents they rarely have the leverage to change. The bank pushes the risk onto borrowers and their sometimes unwitting guarantors, while the solicitor bears the professional risk if things go wrong.
Why Use BlueRock for Independent Legal Advice?
There’s little doubt: the loan guarantor and associated process for obtaining independent legal advice is complex, misunderstood and, at times, thankless. But not all legal advice is created equal.
At BlueRock, we don’t treat independent legal advice as a simple tick-box exercise. We take the time to ensure our clients genuinely understand their obligations, risks, and the practical outcomes of signing, and we don’t pressure anyone into a decision.
Our role is to make sure the process works for you, not just the bank. That means clear communication, honest answers, and, most importantly, putting your interests first. If you have to go through this process, work with a law firm that sees you, not just a document.
