Not all borrowers are aware that more than one lawyer is required in private lending.
And it may also come as a surprise to them who will be responsible for paying all the legal fees.
For the most part, clients do know that they will need a lawyer at some point during their mortgage transaction. But may not love to find out that it’s them as the borrowers who are responsible to pay for a lawyer they aren’t technically using.
When a client finances a deal to purchase or finance through their bank or other ‘A’ lender, the lawyer acting for the client will typically also prepare the mortgage documents for the lender as well. However, in MIC and Private Lending, the lender is typically represented by their own lawyer.
There are two main reasons for this:
- The Law Societies want to see both parties retain their own lawyer in the case of private mortgage transactions. This is put in place to prevent lawyers from acting on the part of both the lender and borrower.
- If there is a conflict that results in a foreclosure where one lawyer represented both parties, they would not be able to act on behalf of either party in this instance.
So, in the case of the legal fees in private mortgages, the cost of the lender’s lawyer is paid by the client, in addition to their own lawyer.
Despite the fact that this is standard practice in the industry, it may come as a surprise to borrowers when they’re in their lawyer’s office signing all of the documents.
In order to prevent any unwanted surprises to borrowers, it’s a good idea to warn them in advance and explain why two lawyers are required in private lending. As we are all aware, a forewarned client is a much happier client