Service Overview
Focused legal support for ila for a guarantor
A lender may ask a third party to guarantee a borrower’s mortgage or loan. A guarantee can create a personal repayment obligation if the borrower fails to pay, even where the guarantor does not receive the loan proceeds or an ownership interest in the financed property. The Business Development Bank of Canada explains the role of personal guarantees in its guide to collateral and loan security.
Independent Legal Advice, or ILA, gives you an opportunity to understand the guarantee with the help of your own lawyer. Depending on the financing arrangement and lender’s requirements, an ILA certificate may be needed before the transaction proceeds.
Why independent legal advice matters
The extent of your exposure depends on the wording of the guarantee and related documents. Our review explains what obligations are covered, any stated limits, and the circumstances in which the lender may seek payment from you.
We also discuss the potential consequences for your personal assets and financial position. Being willing to help a family member or business does not replace the need to understand the documents and make a voluntary decision about the commitment.
How our office can help
Our ILA process may include:
- Document review. Reviewing the guarantee agreement, mortgage commitment, standard charge terms, and related documents provided by the lender or transaction lawyer.
- Risk assessment. Explaining your obligations under the guarantee and the potential consequences if the borrower defaults, including the possible impact on your personal assets.
- A private discussion. Meeting with you in person or virtually, as appropriate, to answer questions and assess whether you understand the commitment and are signing freely.
- Certificate and coordination. Where appropriate, completing the required ILA certificate and signing documents, then forwarding them to the transaction lawyer or lender’s lawyer with your authorization.
Who may need this service
- Parents or relatives guaranteeing a mortgage or loan for a family member.
- Business owners or directors asked to provide a personal guarantee for a corporate loan or commercial lease.
- Friends or associates asked to guarantee financing for another person.
Our office helps guarantors understand the proposed commitment and its practical consequences before they sign.