Providing a solicitor’s certificate for a borrower or guarantor is risky. It is essential to treat it as providing professional advice and not just witnessing documents.
Following are key things to do to stay safe when giving this advice.
- Don’t see walk-in clients. The highest risk factor for solicitor’s certificate claims is new clients, particularly clients who walk in off the street. Many mortgage frauds have involved clients previously unknown to the practitioner. Walk-in clients are often shopping for the lowest fee and are not prepared to value your advice.
- Be cautious when seeing referrals from relatives, a bank, finance broker, agent or other third party. Practitioners must not relax their normal standards and procedures in these situations. LPLC has received claims involving allegations of mortgage fraud, conflict of interest, undue influence and duress when the client has been referred by a third party.
- Consider if there is a conflict when asked to act for multiple parties. A borrower and guarantor or third-party mortgagor have different interests, even if they are family or friends. Joint guarantors can also have divergent interests, especially where they have different assets at risk.
- Be inquisitive when a client wants to act against their own interests. If the client is the borrower, ask why they are borrowing the funds. If the client is a guarantor, ask why they want to become a party to the transaction and don’t see them in the presence of the borrower. Keep a record of your client’s answers.
- Recommend to the client they obtain financial and valuation advice. Cases have shown that practitioners can be under a duty to warn clients about improvident transactions and should strongly recommend the clients obtain financial advice.
- Keep proper records of your advice. This should always include the date, start time and duration of the meeting as well as who attended, the substance of your advice and what the client said they understood about your advice.
- Charge appropriate fees reflecting the necessary work. This reinforces the value of your advice on an important transaction to the client. Acting for clients who do not appreciate this value is risky.
You can find more details in LPLC’s Managing mortgage risk practice risk guide.