Independent Legal Advice for Bridging Loans: When Is It Required?

_‍_{Prepared by}_{Harry Tuke}_{, Solicitor, Head of}_{Residential Property}

_{Last Reviewed: 19 November 2025}

Summary

Independent Legal Advice (ILA) is a legal requirement in many bridging loan and development finance transactions. Lenders require third parties - such as guarantors, property owners, and giftors - to receive advice from a separate solicitor to avoid conflicts of interest and ensure they understand the risks involved. This guide explains when ILA is required and what it involves.

When is Independent Legal Advice Required?

As part of the legal process for bridging loans and development finance, the lender may require that third parties involved in the transaction take Independent Legal Advice from a separate solicitor, or firm of solicitors, to ensure there is no potential conflict of interest between the parties and the advice that they receive.

ILA is typically required for:

Personal guarantees from company directors or shareholders
Third party legal charges over property not owned by the borrower
Large gifts used as part of the transaction
Any situation where there is a potential conflict of interest

Personal Guarantees

Without doubt, one of the most common triggers for ILA requirements is when the borrower is taking out the bridging loan or development finance in a company name. Lenders will almost always require a personal guarantee from the company directors and/or major shareholders, and in order to avoid a potential conflict of interest between the advice given to the company on the one hand and the guarantors on the other, the lender usually insists that the guarantors take ILA from a separate solicitor.

The ILA solicitor has to explain to the guarantor that they are effectively guaranteeing the whole of the loan (plus any subsequent costs, charges, penalties and default interest incurred) in the event that the company goes into default and is unable to repay the loan on demand. In practice this means that the lender could potentially come after the guarantor's personal assets (including the family home) to settle any outstanding liability. It is very important that the guarantor understands the consequences of entering into the guarantee, not least because they may not be solely responsible for the company and its future dealings. It should also be noted that where there is more than one person giving a personal guarantee, they will be 'jointly and severally' liable, which means the lender may choose to come after one person instead of the other, if that person is in a better financial position. Co-guarantors are not equally liable under the terms of the guarantee, and how the lender chooses to enforce it is entirely at their discretion.

Third Party Legal Charges

There may be occasions when a borrower is securing a bridging loan over property that isn't registered in their name. One example of this is when the borrower is borrowing in a company name, but using a property registered into their personal name as the security. Or a borrower might have to offer up their parents' property as part of the deal to fall within the preferred loan to value ratio. In these cases, the property owner who isn't borrowing the money requires independent legal advice separate from the borrower.

This is because the advice being given to the borrower and property owner (in their different capacities) will be very different. On the one hand, the borrower is benefitting from the release of funds into their name with less personal risk, but on the other hand the property owner will not benefit from any of the money but risks losing their property if the borrower defaults. Usually there are very good reasons for this arrangement, and the difference between the borrower and the property owner may only be an academic one, but the property owner should consider their position very carefully because ultimately the fate of their property could rest in the hands of the borrower over whom they have no direct control.

Gifts

Anyone who is gifting large sums of money to a borrower should take advice from a separate solicitor, and that solicitor should ensure that the person making the gift (the 'giftor') understands that they will not be able to make any claim against that money or any related property in the future. By agreeing to gift the money to the borrower, the giftor is essentially agreeing not to have any financial, legal or beneficial interest in how that money is used by the borrower in the future, and from the lender's point of view the gift has to be distinguished from a loan because they wouldn't want any obstacles in the way of carrying out enforcement action if the borrower ends up defaulting on the loan.

ILA Certificates

With all Independent Legal Advice the lender will usually require the ILA solicitor to certify that they have provided the necessary advice to the third party, that the third party understood the consequences of entering into the legal deed, and that they were of sound mental capacity and were not being coerced by anybody else. Whilst it is preferable for ILA to be given in person, it is possible for such advice to be given remotely in certain circumstances.

How We Can Help

If you require Independent Legal Advice for your bridging loan or development finance transaction, our team can provide thorough advice on personal guarantees, third party charges and gifting arrangements. We offer rapid ILA certificates to keep your transaction moving forward.

About the author

Harry Tuke, Solicitor

Head of Residential Property | Acumen Law

Brighton & Hove

Harry advises on bridging loans, development finance and Independent Legal Advice requirements for property transactions. He works with borrowers, guarantors, property owners and lenders to ensure smooth completion of secured finance arrangements.

Independent Legal Advice for Bridging Loans: When Is It Required?

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