Etridge Letter
An Etridge Letter, also known as a Certificate of Advice, is a document prepared by a solicitor following an Independent Legal Advice (ILA) session.
This advice is typically required by lenders in high-risk mortgage scenarios where one party may be at a disadvantage. These scenarios include:
- Joint Mortgage Sole Proprietor Mortgages.
- Borrower and Proprietor Mortgages.
- Director Personal Guarantee Mortgages.
In each case, the risk is higher for an individual who receives little or no direct benefit from the mortgage. Therefore, they require independent legal advice to ensure they fully understand the associated risks.
Unfortunately, ILA is sometimes treated as a formality, but the landmark Royal Bank of Scotland plc v Etridge case demonstrates the severe consequences of inadequate advice, including potential home loss for clients and substantial financial penalties for solicitors.
The information provided in this article is for general guidance only and does not constitute legal advice.
Etridge Letter: Definition and purpose
The Etridge Letter, a key component of Independent Legal Advice (ILA), emerged from the landmark House of Lords case Royal Bank of Scotland plc v Etridge.
This case, along with seven related appeals, examined situations where undue influence was alleged in mortgage transactions.
The core issue across these cases was that husbands had secured mortgages on jointly or solely owned properties to fund their businesses, often without their wives' full understanding or consent.
When these businesses failed and lenders sought repossession, the wives argued they had been subjected to undue influence to sign the mortgage agreements or guarantee deeds.
While Mrs Etridge's claim of undue influence was ultimately unsuccessful, the review of these appeals led to the establishment of the Etridge Guidelines.
These guidelines outline the specific duties of banks and solicitors in cases where undue influence may be present, ensuring that vulnerable parties receive proper legal protection.
The Etridge Guidelines have become a crucial framework for providing independent legal advice in such transactions. Solicitors who fail to adhere to these guidelines risk legal challenges from their clients, as demonstrated in the case of Padden v Bevan Ashford. ILA is required or you won't be able to move forward in the transaction.
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Lender obligations for Independent Legal Advice
When a bank or a lender accepts a guarantee in a non-commercial transaction, they are legally considered to be "put on inquiry" regarding the potential for undue influence. This means they must take steps to ensure the guarantor understands the risks involved.
To satisfy this requirement, the bank must ensure that the guarantor receives Independent Legal Advice (ILA) from a competent solicitor. The lender is obligated to ensure the borrower understands and consents to the service.
Only after this advice has been provided can the bank proceed with the transaction. The solicitor will then provide the bank with a certificate of advice, confirming that they have explained the nature and consequences of the guarantee to the guarantor.
Royal Bank of Scotland v Etridge: Case Summary
In 1998, Mr and Mrs Etridge purchased a property in Mrs Etridge's sole name, financing it with mortgages secured against another jointly owned property.
Mrs. Etridge had no involvement in arranging these mortgages, signing the documents based on her trust in her husband. When the Royal Bank of Scotland later sought repayment and initiated possession proceedings, Mrs Etridge claimed she had been subjected to undue influence.
However, the Court of Appeal ruled against Mrs Etridge, stating that she should have read the mortgage documents and sought independent legal advice. This decision highlighted the importance of ILA in protecting individuals in such situations.
Etridge Guidelines: A solicitor's role in Independent Legal Advice
When a mortgage lender requires Independent Legal Advice (ILA) for a party involved in transactions such as joint mortgage sole proprietorships, joint proprietor sole mortgages, occupier waivers, or mortgage guarantees, the solicitor must adhere to the Etridge Guidelines.
These guidelines ensure the client fully understands the risks and implications:
- Explaining the nature of the legal documents and the potential risk of losing their home or facing bankruptcy if mortgage payments are not met.
- Detailing the seriousness of the risks based on the mortgage's purpose, amount, and terms. Assessing if the client understands the property's value and potential alternative repayment sources.
- Informing the client that the lender may change loan terms, including increasing the loan amount, without their consent.
- Confirming whether the client agrees for the solicitor to provide written confirmation to the bank regarding the advice given.
- Providing ILA in a face-to-face meeting, independently from the borrower, using clear, non-technical language.
- Discussing whether the client wishes the solicitor to negotiate loan terms with the lender, such as limiting the borrowing amount.
- Emphasising the client's right to choose whether to sign the mortgage or guarantee, ensuring they are free from undue influence or pressure.
- Arrange a free call today with a member of our ILA team to discuss your needs.
- Advice appointments available from 26/03/2025.*
- Video conference to your own home/work.
- Slots from 9am to 5pm.
- Fast turnaround from an experienced solicitor.
- Rated Excellent on Trustpilot.
Which solicitors can provide Independent Legal Advice (ILA)?
Independent Legal Advice (ILA) should be provided by a solicitor with sufficient expertise and experience to understand and explain complex financial information related to mortgage transactions. This ensures the client receives accurate and comprehensive advice.
The solicitor needs to be truly independent, an impartial third-party, and not involved in the current transaction.
Our solicitors provide ILA for the following types of transactions:
- Joint Mortgage Sole Proprietor: Advice for a client who is jointly liable for the mortgage but not named on the property's legal title.
- Joint Proprietor Sole Mortgage: Advice for a client who is a legal owner of the property but not named on the mortgage (often requiring advice on an occupier waiver form).
- Occupier Waiver : Advice for a client aged 18 or over who resides at the property.
- Guarantee (Director or Parent): Advice for a client providing a guarantee for a mortgage from which they receive no direct benefit.
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
