Independent Legal Advice (ILA): Why It’s More Than “Just a Signature”
Whether you’re buying property, guaranteeing a loan for a family member, or entering a business transaction, signing legal documents is often treated as a procedural step / something to get through quickly so the deal can proceed.
In reality, these documents are legally binding contracts. They can affect your personal assets, financial security, and future obligations long after the transaction is complete.
This is where Independent Legal Advice (ILA) plays a critical role: not as a formality, but as a safeguard.
What Independent Legal Advice actually means
Independent Legal Advice is advice given by a lawyer who:
has no connection to the other parties involved in the transaction, and
acts solely in the interests of the person receiving the advice.
The lawyer’s role is not to assess whether a deal is financially “good” or “bad”. Instead, it is to explain:
the legal nature and effect of the documents,
the risks and obligations you are taking on, and
the practical consequences if things do not go to plan.
Independence is essential. Without it, the advice cannot properly protect the person signing.
Why Independent Legal Advice is treated so seriously
Banks, landlords, and other institutions frequently require ILA, particularly where:
a personal guarantee is involved
a third party is providing security
there is an imbalance of bargaining power or information
From a legal perspective, ILA serves several important purposes:
it helps ensure the agreement is entered into freely and with understanding
it reduces the risk of later disputes about pressure, misunderstanding, or unfairness
it supports the enforceability of the document itself
For guarantors especially, ILA is often the only opportunity to fully understand the worst-case scenario, including the risk to personal assets such as the family home.
Who is typically required to obtain Independent Legal Advice?
Independent Legal Advice is most commonly required where a person is taking on legal or financial risk for the benefit of someone else, or where the consequences of signing may not be immediately obvious.
Common examples include:
Guarantors
This is the most frequent scenario.
Parents guaranteeing a child’s home loan
Family members guaranteeing a business loan
Individuals guaranteeing a lease or commercial facility
Guarantors often receive no direct financial benefit, yet may be exposing their personal assets to significant risk.
Spouses or partners providing security
ILA is commonly required where:
one partner’s personal assets are used as security for the other partner’s business loan
a jointly owned property secures obligations that primarily benefit one party
ILA helps ensure the person providing security genuinely understands the risk they are assuming.
Parties to family or financial arrangements
Independent Legal Advice is often required for:
deeds of settlement or release
financial or property arrangements between family members
transactions involving unequal bargaining positions
The purpose is to confirm that each party understands the legal effect of the arrangement and is signing freely.
Borrowers in complex or non-standard transactions
ILA may also be required where agreements involve:
companies, trusts, or SMSFs
related-party transactions
unusual or layered security arrangements
In these cases, the legal structure itself creates additional risk that must be clearly explained.
Joint parties with unequal benefit or exposure
Where multiple people sign the same document but:
one party carries greater liability, or
one party receives little or no benefit
Independent Legal Advice helps ensure the agreement is entered into knowingly and fairly.
The position in Victoria (and why process matters)
In Victoria, Independent Legal Advice frequently arises in matters such as:
loan guarantees
deeds of settlement or release
lease guarantees
transactions between related parties
There is no single statutory checklist that applies in every case. However, courts and lenders generally expect that:
the lawyer has actually reviewed the documents
the advice is tailored to the individual’s circumstances
the client understands the consequences of signing
the advice is given without pressure or urgency
A lawyer who simply “signs off” without proper explanation risks professional exposure and the document itself may later be challenged.
What about interstate Independent Legal Advice?
While the core principles of Independent Legal Advice are broadly consistent across Australia, there are important practical differences, including:
lender-specific or state-specific certificates
different expectations about what must be explained
varying approaches taken by courts if an agreement is later disputed
ILA should not be treated as interchangeable across jurisdictions. Advice that is appropriate in one state may not satisfy requirements in another — particularly where guarantees or family arrangements are involved.
What happens during an Independent Legal Advice appointment?
While every matter is different, an ILA process typically includes:
reviewing the relevant documents in advance
meeting privately with the person receiving the advice
explaining key terms, risks, and obligations in plain language
discussing the consequences of default or non-compliance
confirming the advice was given freely and understood
Only once the lawyer is satisfied that the client genuinely understands the document will a certificate of Independent Legal Advice usually be provided.
When should you pause and get Independent Legal Advice?
You should strongly consider ILA if:
you are guaranteeing someone else’s obligations
your personal assets are being used as security
you are told the document is “standard” or “non-negotiable”
you feel pressured to sign quickly
the consequences of default are unclear
ILA is not about slowing transactions down, it is about informed consent.
Final thought
Independent Legal Advice exists to protect people at moments where legal and financial risk intersect.
When done properly, it provides clarity, reduces disputes, and ensures decisions are made with full understanding- not hindsight regret.
Disclaimer
This insight is general information only and does not constitute legal advice. Independent Legal Advice requirements and outcomes depend on individual circumstances and jurisdiction.