A Reverse Mortgage Certificate is the Certificate of independent legal advice that is often required by lenders providing Reverse Mortgage Loans or Equity Draw Down Loans. This certificate is often referred to as an Acknowledgement of Independent Legal Advice or Solicitors Certificate.
Lenders require such certificates for Reverse Mortgage’s, Equity Draw Down Loans and for individuals whom are seeking to act as a guarantor for another borrower.
The reason for the requirement that borrowers and guarantors seek independent legal advice for these types of lending arrangements is undue influence. A High Court Decision in Thorne v Kennedy [2017) provided an opportunity for clarification on the uncertainty surrounding the law of financial agreements since they became legally binding in the year 2000.
Prior to a 2007 wedding, a wealthy property developer (Mr. Kennedy) prepared two binding financial agreements to be signed by his soon to be wife Ms Thorne. The first agreement was provided 10 days before the wedding and the second agreement was provided 30 days after the wedding. Mr. Kennedy stipulated to Ms Thorne that if the agreements were not signed, the wedding was to be called off. Ms Thorne upon receipt of the agreements took the agreements to an experienced family lawyer who deemed the agreements to be “the worst agreements he had ever seen” and “wholly inappropriate” and strongly advised Ms Thorne that she not sign them. The agreements stipulated that if the couple separated within three years of marriage, Ms Thorne was entitled to nothing from the $20 Million-dollar asset pool and if the couple separated after three year’s she was entitled to a one-off payment of $50,000.
In 2011 the couple separated. Proceedings were commenced by Ms Thorne who sought to have the binding financial agreements set aside and sought an adjustment to the property order of $1.1 million and spousal maintenance of $104,000. The High Court found in favour of Ms Thorne and set aside both agreements on the grounds of undue influence. After reviewing the terms of the binding financial agreements, the High Court held that the only explanation as to why Ms Thorne would sign such an excessively unreasonable agreement (even after receiving independent advice to the contrary), was the relationship of undue influence between her and Mr. Kennedy.
Individuals who often seek to have a reverse mortgage and or draw down equity loan or are going guarantor for another borrower are often elderly and vulnerable and often fall victim to predatory lenders and borrowers. As a result, there is a legal requirement to seek independent legal advice on loan contracts prior to entering into agreements with the lender.
McDonald Milnes provide independent Legal Advice on Reverse Mortgage Contracts, Equity Loan Facilities and Guarantor agreements for a fixed fee. If you need independent legal advice on your loan contract, please contact Daniel McDonald on (03) 9070 1107.