Are you guaranteeing a loan for someone else? Does the lender require a certificate from a lawyer?
A guarantee is a promise. A person who guarantees a loan (i.e. the guarantor) accepts the responsibility of any debt owed to a lender (i.e. a bank) if the borrower defaults on the loan.
Being a guarantor creates significant obligations as it is a risk without reward. If the borrower defaults on the loan, you as the guarantor, are liable to pay the amount owed by the borrower. If you fail to do so, the lender can:
- sell the asset secured for the loan; and/or
- sue you personally.
Due to the serious responsibilities and potential consequences of providing a guarantee, lenders are more frequently requiring solicitors to sign off that the guarantor understands their responsibilities and obligations pursuant to the loan or facility agreement before the lender advances any funds to the borrower.
Whilst a solicitor’s certificate assures the lender that you understand your obligations as guarantor, having a solicitor review the loan agreement you are guaranteeing will also ensure that you are adequately protected from unreasonable terms and unfavourable outcomes.
If you have been asked to guarantee a loan, then the Antunes Lawyers Commercial Law team can make sure you are protected. For further information or a formal consultation, please do not hesitate to contact us on (02) 9964 0499.