Cost of drawing up loan agreement

I got some quotes for drawing up loan agreement via a solicitor. To my surprise, they are around $1000 plus GST.

I'm not saying the solicitor is ripping me off, the fact that everyone I called is quoting around the same amount is an indication that its around this price range. But I'm genuinely curious why this is so expensive. There really isn't must work to be done, they have a template, and they are more or less plugging figures that I'm telling them.

A property purchase I would think involves more work on their side, yet the cost of the loan agreement is almost the same.

Why is it so costly?

 

You think the lawyers would just bash some names and numbers in a template and leave it at that?

They're going to want to talk to you about what you want to use the loan agreement for, and make sure its suitable for that purpose...

 

Yes, more or less. Its just a simple loan between two family members.

If the price of a property purchase is around the same ball park as the lease agreement, I simply can't see how this loan agreement would require more effort than a property purchase. Or maybe they are undercharging the property purchase I say this is probably like 20per cent of the work of a property purchase. Hence why I'm curious to why it's so expensive.

 

No such thing as a 'simple' loan between two family members in my experience. Not the type where you need the protection of a loan agreement anyway.

Did you know that there's a presumption against the intention of creating legal relations between family members for example?

 

Haha I don't even know what that means.

Maybe I'm underestimating the effort but on the phone I was told its more or less one meeting and then you come in to sign.

 

You are paying for legal expertise. For very cheap, you can buy a template online where a wizard collects your details and produces a contract. Do not do this! Unless you are an experienced in contract law you don't know if the contract is suitable or not. You might read it and think you understand it and think it does the job. But what if it is missing something important? That's what you won't know. DIY law is a big mistake.

I have studied contract law at masters level university and I would not try to draft a loan agreement because I do not have the experience to do it right.

This is an area where you need to pay for someone's expertise and knowledge and to get it done right. Sure it might cost $1,000 and for that amount of money it might not take the solicitor much time to prepare the agreement. But you are not paying for time you are paying for expertise. My contract solicitor has spent years at uni studying and years practicing commercial contract law. If I can buy all those years and experience for $1,000, that is cheap. I don't quite a lot of work with him and every cent I have spent with him has been worth it!

Personally I think $1,000 for a loan agreement is reasonable. I would pay that to have the agreement drafted correctly.

 

Thanks Perthguy. I don't intend to draft it myself. So i'll definitely be going through the solicitor.

Perhaps I'm underestimating the effort involved. I'm just using a property purchase as a baseline, I thought this would be more work than the contract.

Its all good, it was more curiousity why it was so expensive. Now i know.

 

It's a fair question. I actually think it takes more effort, more skill and more expertise to draft a loan agreement. A contract for sale of a property is more standard. I have used a conveyancer to prepare one in Victoria. Loan agreements are a lot more complex (IMO) and need more expertise and knowledge. I would not trust my conveyancer to draft a loan agreement.

 

Hi guys, does such a loan need to be registered to be valid?
I've come across the term "registered" before (I think it was on an ATO document)
and I wonder what that meant

 

Security may need to be registered for tax purposes in some cases. The loan duration may impact what is allowed v's what fails. Part of the legal advice I would think. You also dont want what looks like a loan but has no recourse through the loan maintenance either. (eg no payments, no security no accounting for interest etc...its a gift perhaps ?)

 

Thanks Paul but is there a loan registry as such
or do they mean that we have to send a copy to the ATO?

 

Loans aren't registered or required to be registered.

Loan agreements are not sent to the ato either.

Security for a loan can be registered though such as mortgages and ppsa charges.

 

Thanks Terry
Cheers