With an increasing demand for properties, business facilities financiers will often require guarantees from the related parties of the borrower, whether that be the borrowing company’s director, the borrower’s parents, or partners on top of additional securities such as a mortgage. At the same time, with increasing degree of scrutiny into lending practices, financiers will require the guarantors to ensure that they have received independent legal advice.
Given the time pressures often involved in finance and settlement, it is tempting to hope that the lawyer can stamp and sign the needed documents, and for the borrower to get their funds. However, we are required to give you with the advice that you need, especially as claims involving loans are rising.
Usually by signing a guarantee, you are providing a guarantee that should the borrower default on the loan, the guarantor will cover the payments and potentially indemnify the financier for any losses they suffer as a result. This is a serious obligation being placed upon the guarantor, especially if the actions of the borrower is outside of your control.
For instance, if you are a minor shareholder in a company that is borrowing funds and are required to be a guarantor, you may have limited input into the repayment decisions of the company – yet you could be held responsible for the full extent of the borrowed amount, plus costs and interests.
The process of obtaining independent legal advice involves more than getting a lawyer’s signature on a document. Lawyers have an obligation to warn their clients of the reasonably foreseeable risks if the matter does not proceed as hoped or expected. This is part of a lawyer’s duty to give you appropriate legal advice.
Reviewing guarantee agreements are tasks that we do regularly at McNamara Law. To ensure that you are provided with high quality legal advice, we will take the time to carefully review your agreement and highlight your risks and obligations. We will explain these aspects carefully so that you can understand what is happening and how the documents operate. Importantly, we will highlight for you issues such as: are there any other competing interests, the extent of any potential indebtedness you may face and the true value of the guarantee given. By doing this, you will be aware of the nature and effect of the transaction, and be able to have some mental comfort about what you are entering into. Contact our team on 1300 285 888 to make an appointment.
Unit 10
88 Limestone St
Ipswich 4305
Queensland
Ph: 07 3816 9555
GE Building,
Level 1, 6 Yoga Way
Springfield Central 4300
Queensland
Ph: 07 3470 3600
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