Independent Legal Advice for a Sole Proprietor Mortgage
A Joint Mortgage Sole Proprietor product (also referred to as a Borrower Non-Proprietor mortgage) is a type of mortgage where one or more individuals are named on the mortgage and are legally responsible for the debt, but only one of them is the legal owner of the property.
Unlike a standard mortgage where all borrowers typically legally own the property, this structure means that some borrowers take on all the financial risk without the benefit of legal ownership.
Because of this imbalance, lenders require the borrower who isn't a legal owner to receive independent legal advice (ILA) from a solicitor. This ensures they fully understand the financial risks they are taking and that they are doing so without influence or misrepresentation. Our fixed fee for a borrower non-proprietor is £235 INC VAT.
Once ILA is formally confirmed and received, both the borrower (non-legal owner) and the solicitor will sign a Certificate of Independent Legal Advice.
It's also important to note that mortgage lenders can have different terms and conditions. After receiving independent legal advice, you might decide that the risks outweigh the benefits. Remember, even if you think certain terms might never be enforced, the lender could pursue the non-legal owner for the mortgage payments, and this is the risk you face.
What are the risks of a Sole Proprietor Mortgage?
Joint liability for mortgage repayments
Whether or not you have an agreement with the legal owner about who pays the mortgage each month, the fact remains that all borrowers named on the mortgage are jointly liable.
This means that if the legal owner forgets to, is unable to, or chooses not to pay, a missed mortgage payment will appear on your credit report. This can have significant negative consequences, potentially leading to refusal for most future borrowing for up to six years.
Not only that, but you'll have to fork out the money as well as have it affect your credit rating. The unfortunate reality is that it's easier for the lender to come after the additional borrower rather than go through the route of repossession.
Unable to remove your name from the mortgage
If you later wish to remortgage the property or if the legal owner decides to sell, you can only do so if all parties named on the mortgage agree. This can sometimes become a complicated situation as you're unable to force a sale.
There's no guarantee that the legal owner will be able to afford the mortgage on their own at that time, or that they will want to sell the property when you need or want them to.
All Money Clause
Some mortgage terms include what's known as an "all money clause." This is significant because your liability isn't limited to the initially agreed loan amount.
This type of clause can allow any of the borrowers to draw down additional funds and add them to the mortgage, potentially without the knowledge or consent of all other borrowers.
Since you have joint liability with the legal owner, the lender could legally pursue you for these amounts secured against the property, even if you were unaware of the additional borrowing.
Covenant to pay and power of sale
The lender has the legal right to sell the property if the loan, including interest and any other owed amounts, is not paid on time, or if any mortgage terms are breached.
This means the sole proprietor could ultimately lose the home if the lender's right to sell the property is triggered. If the lender appoints a receiver to manage the sale of the property (known as repossession), the total amount you owe will include the receiver's fees.
If the sale doesn't cover the full amount owed to the lender, they have the right to pursue you personally to recover the outstanding shortfall from your own assets. In extreme cases, if you cannot cover this shortfall, you could be made bankrupt.
Unable to remortgage your own home
Taking on a sole proprietor mortgage can even impact your own ability to remortgage your own property due to affordability issues.
If the lender for your current mortgage is the same one that provided the sole proprietor mortgage, they might not allow you to remortgage your own home if there are any outstanding payments on the other property.
Can the lender come after a non-proprietor even after a sale?
Yes, they can. If the property has been sold, perhaps undervalued, the lender can exercise the right to come after the outstanding amount(s) of debt .
- Bespoke appointments from 9am-5pm Mon-Fri. Contact us for out-of-hours appointments.
- Availability from 18/04/2025.(i)
- Video conference to your home/work.
- Etridge Letter/Advisory Letter provided confirming ILA.
- On 99%(ii) of mortgage lender panels.
Who can give Independent Legal Advice?
For Independent Legal Advice in mortgage transactions, the advice must be provided by a qualified professional.
This typically includes a solicitor holding a current practising certificate or, in England and Wales, a licensed conveyancer or a Fellow of the Institute of Legal Executives.
What Independent Legal Advice does the solicitor give?
During your Independent Legal Advice session, the solicitor must ensure you fully understand the implications of entering into a sole proprietor mortgage. This involves providing comprehensive advice on several key areas, including:
The Mortgage Documents
The solicitor will thoroughly explain the nature of all the mortgage documents you are signing. This includes detailing the potential risks involved, most significantly the risk of losing your home if the mortgage payments aren't met. They will also explain the possibility of facing bankruptcy in severe cases of mortgage default.
The Risks
The solicitor will assess and explain the specific risks based on the details of your mortgage, such as the loan amount, the interest rate, the repayment term, and the overall purpose of the loan.
They will also likely discuss whether you understand the property's value and if you have considered alternative sources of repayment should your primary source of income be disrupted.
Loan Term Changes
Some mortgage agreements may allow the lender to change the loan terms in the future, which could include increasing the loan amount or altering interest rates, potentially without your direct consent. The solicitor should highlight any such clauses in your mortgage offer.
Consent for Written Confirmation
The lender will typically require written confirmation from the solicitor that you have received and understood the Independent Legal Advice. The solicitor will confirm with you whether you consent to them providing this written confirmation (often referred to as the ILA certificate) to the bank.
Private and Clear ILA
The solicitor will ensure the meeting to provide Independent Legal Advice is conducted privately, without the presence of the legal owner or any other party who might exert undue influence. This is particularly important if the advice is given via a video call.
Loan Term Negotiation
You have the right to ask the solicitor to discuss and potentially negotiate certain loan terms with the lender on your behalf. This could include trying to limit the amount of future borrowing that the legal owner might be able to take out without your consent. The solicitor will discuss whether you wish them to pursue any such negotiations.
The Right to Choose
Ultimately, the decision to sign the mortgage or guarantee is yours alone. The solicitor will emphasise that you have the right to choose whether or not to proceed and will ensure that you are not feeling pressured or unduly influenced by any other party.
What happens after the solicitor ILA meeting?
Once you've received Independent Legal Advice, the solicitor will send a confirmation to the mortgage lender. You will also receive a copy of this confirmation (the Etridge Letter), for your records.
This letter confirms that you have received independent advice and understand the risks involved in the mortgage.
The solicitor will also likely provide you with a certificate confirming that advice has been given, which you may need to provide to the lender directly or which the solicitor might send on your behalf.
After this, you will have time to consider the advice you have received and decide whether you wish to proceed with the mortgage offer.
Do I have to sign the mortgage deed after the advice?
No, you are not obligated to sign the mortgage deed even after receiving Independent Legal Advice. You are not even tied into the mortgage agreement if you sign the deed at that point.
For a property purchase, you can withdraw from the mortgage product at any time up to the point of exchange of contracts. For a remortgage or transfer of equity, you can withdraw before the completion date.
If, after careful consideration of the risks, you are not comfortable proceeding with the mortgage product, you absolutely should not do so. The purpose of ILA is to ensure you make an educated decision, and you have the right to walk away from the transaction if you have any doubts or concerns.
How much does ILA for a Sole Proprietor Mortgage cost?
The cost of Independent Legal Advice for a Sole Proprietor Mortgage can vary depending on the solicitor or conveyancer you choose and the complexity of your specific situation.
However, at SAM Conveyancing, we offer a fixed, competitively low fee for this service starting at £235 INC VAT if you're the only party requiring ILA, and £180 INC VAT for an additional party needing ILA.
Typically, the fee will cover the solicitor's time reviewing the mortgage documents, meeting with you to provide advice, ensuring you understand the implications, and issuing the necessary certificate to the lender.
It's always best to get a clear quote from your chosen legal advisor before you proceed. Learn more about our Independent Legal Advice for Sole Proprietor Mortgage service using our enquiry form below.
The Certificate of Independent Legal Advice for a JBSP
As we've mentioned, after receiving Independent Legal Advice, both you and the solicitor will sign a certificate confirming that the advice has been given and understood. This certificate is an important document for the lender.
Your Responsibilities: Non-payment of the loan and other obligations
The mortgage offer wording emphasises the importance of meeting your mortgage payment obligations. As a borrower, you have to ensure your mortgage payments are made on time and in full.
Keeping on top of payments
Lenders might work with you if you experience payment difficulties, but repeated missed payments can lead to further administration fees and an increase in your overall mortgage debt. Ultimately, this can result in action being taken to repossess the property.
If you are a joint borrower (even if you are not the legal owner), you are usually considered "jointly and severally" liable for the mortgage. This means that the lender can pursue any or all of the borrowers for the full amount owed.
Work with your lender and get protected
It is strongly recommended that you consider appropriate protection, such as life assurance or critical illness cover, to help ensure payments can continue to be made should any party to the mortgage become unable to contribute.
It's also important to be aware that any failure to make mortgage payments will be reported to credit reference agencies, which can negatively impact your ability to obtain further loans or other forms of credit in the future.
Financial obligations
In addition to your mortgage repayments, there may be other financial obligations related to the property. These could include Freehold Rent Charges, Leasehold Ground Rent, and/or Service Charge payments.
The mortgage offer wording highlights that these payments must be made in full and on time. Failure to do so could lead the lender to make these payments on your behalf to protect their security, with the added costs, administration fees, and interest being added to your loan. This can increase your outstanding debt and potentially lead to repossession due to a breach of contract.
Do you need Independent Legal Advice?
Keep in mind that you must be on your own, with no one else in the room, for the full duration of time that the Independent Legal Advice is being given via video call.
Please fill in the form below if you are the only party needing Independent Legal Advice.
Fixed fee of £235 INC VAT | Availability starting 18/04/2025(i)
Please fill in the form below if you are an additional party needing Independent Legal Advice.
Fixed fee of £180 INC VAT | Availability starting 18/04/2025(i)
Lender Panels(ii)
Jack is our resident Content Writer with a wealth of experience in Marketing, Content, and Film. If you need anything written or proof-read at a rapid speed and high quality, he's your guy.
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.
