There are certain situations when purchasing or selling a property or refinancing your mortgage, where one or more of the parties to the transaction will require independent legal advice (ILA).
ILA is the process where an outside, unbiased lawyer is retained by one party for the limited purpose of providing advice on the real estate transaction so the individual appreciates the nature and consequences of a decision that must be made.
- Under certain situations such as conflict of interest of joint retainers, you may be required to obtain independent legal advice. Your mortgage lender may also require ILA to qualify you for a loan.
- ILA will help ensure you understand all legal aspects of the closing and any agreements or contracts you sign and will also provide you with a certificate upon completion.
When Would I Need ILA?
According to the Ontario lawyer’s rules of professional conduct, you would be required to obtain Independent Legal Advice (ILA) under several circumstances.
- When there is a potential conflict of interest, a lawyer may still be permitted to act for a client but will be required to advise the client to seek independent legal advice. This is to enable the client to fully understand the implications of a conflict of interest.
- A joint retainer occurs when two or more people hire the same lawyer to represent them for a shared purpose, such as a real estate transaction. In this scenario, lawyers are advised to recommend that their clients seek independent legal advice.
- If a lawyer finds out that they have made an error or an omission that could be damaging to the client’s case, the client should be advised to seek independent legal advice.
Should you decide not to obtain ILA during a real estate transaction, there may be consequences. For example, the contract that you sign may not be legally enforceable should the courts deem that you were not properly informed. In addition, certain mortgage lenders may require you to obtain some form of ILA in order to qualify for your loan. Be sure you understand your circumstances before you make a decision.
What Will Happen When I Get ILA?
When you seek independent legal advice, you will meet with a lawyer who will confirm that you fully understand all legal aspects of your transactions. Including benefits, liabilities and any legal ‘jargon’ they may not fully understand. At Deeded, we connect you with one of our independent real estate lawyers lawyers who can provide an ILA using our virtual technology, meaning you won't have to come into the office. Instead, you'll meet the lawyer over a secure video conference.
When looking for a lawyer to provide you with legal advice, you should ensure they offer the following services:
- Review your purchase/sale agreement and all other legal documents and attachments.
- Provide consultation and advice for agreement and all other legal documents.
- Provide you with an independent legal advice certificate upon completion of their services.
- If you are seeking convenience, will the lawyer provide an ILA over a video conference or other remote technologies?
When do Lenders Require ILA?
In many situations, it may be the mortgage lender that will require persons to obtain ILA in order to qualify for the loan. ILA is typically required to be obtained by the legal titleholder of the property. This is meant to ensure that they receive a simple explanation of the nature and obligations contained in their mortgage agreement from an impartial third-party lawyer.
In addition to the title-holder, lenders may require non-title holding spouses or other individuals involved in the transaction such as a guarantor or covenantor, to receive ILA as well. This is to ensure that they also receive an explanation of their obligations as they may become liable for repayment of the mortgage loan and observance of the mortgage obligations under certain circumstances, such as the death of the title-holder.
In most circumstances, the requirements from the lender on who will need to obtain ILA will be set out before-hand in the mortgage commitment. If it's not, we would recommend taking the initiative to bring this up with the lender, whatever the result is make sure you take clear written instructions in case you ever need to refer back.
If this looks overwhelming to you, rest assured that the Deeded team is here to make things easier and as simple as possible.