Hi all,
I’m going to cut to the chase. We are nearly complete with our application for a loan through a bank when we were told that we will have to sit down with a solicitor and have him/her explain the guarantors responsibilities in relation to buying an investment property; the structure is one of a company ATF trust and the directors will be guarantors for the loan. Without the signoff from the solicitor the loan will not be proceed.
Furthermore that this is a requirement with most lenders these days. Besides telling us (guarantors) that we are ultimately responsible for the loan what more can the solicitor provide the guarantors with? Is this a recent bank related requirement or has it been around for some time?
Thanks in advance
FoxHouse
It means a bit more than that. For example unless specified the directors obligations aren't necessarily equal. If you had 3 directors and 2 had little if any recoverable assets at the time of liquidation the burden may fall on the remaining director.
Many SME B2B credit arrangements require personal guarantees. Getting a solicitor to sign you off ensures you fully understand your rights and obligations. If things turned to custard you can't turn around later and say the bank failed in their duty to advise you (directors) fully and frankly. It also ensures the legal advice is objective.
It also has to be a different solicitor to the one you are using for the purchase of the property if that is what the loan is for
I have to do it every time for the loan based on the equity in our home. The main 80% loan is fine but I always need an independent solicitor to sign off that I am aware of my responsibilities as a guarantor as I owe half our own home. The Investment loans are all in Paul's name only.
Its just a legal requirement by the government that the banks have to do these days
Jean
Jean,
No, I don't think there is any legislation requiring this. It is just the banks being overly cautious and trying to cover themselves if things go wrong and then the guarantor starts saying "I didn't know I was a guarantor…."
There are many cases, often involving sons with immigrant parents with English as a second language, where the banks have lost out.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terryw nice concise answer. It is just a frustrating process at the moment.
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