Loan documents review under a Trust structure

Discussion in 'Loans & Mortgage Brokers' started by Gypsyblood, 17th Jul, 2017.

Join Australia's most dynamic and respected property investment community
  1. Gypsyblood

    Gypsyblood Well-Known Member

    Joined:
    12th Dec, 2016
    Posts:
    522
    Location:
    Melbourne
    Hi,

    Just a quick question please, I am currently in the process of settling a property within a Discretionary Trust structure with the Trustee as a company and me as the director of that company. I have just been handed documents by the bank for settlement. I sent these to my conveyancer/lawyer for a check as it explicitly stated getting legal advice as required. However my current conveyancer/lawyer has advised that they do not review loan docs as part of the conveyancing transaction as it adds considerable time and cost for their clients and as the lender’s generally does not negotiate any of the terms unless the deal is very large. This is the same lawyer who has helped set up my discretionary trust structure.

    Can i check please if your experience is similar when dealing with Conveyancers? Would you usually get a review done of the bank documentation? Is it of any value or its the usual and of no value since you cant negotiate the terms back with the bank anyway?

    Thanks for advising!
     
  2. RPI

    RPI SDA Provider, Town Planner, Former Property Lawyer

    Joined:
    18th Jun, 2015
    Posts:
    2,025
    Location:
    Brisbane
    That is correct. The fees you pay for conveyancing wouldn't cover that.
    Often need independent legal advice also - that is independent of the solicitor completing the transaction.
     
    Gypsyblood likes this.
  3. Gypsyblood

    Gypsyblood Well-Known Member

    Joined:
    12th Dec, 2016
    Posts:
    522
    Location:
    Melbourne
    Thanks, i am currently the guarantor of the debtor (Trust company) under the discretionary trust structure. I am not familiar with trusts (this is my first one) but my understanding is that it the ideal structure to be part of in the long term.

    The documents that the bank has given me are two:
    1. A loan document pack
    2. A guarantor document

    The guarantor document is implying that incase there are any issues (which they shouldnt be, touch wood) the lender can sue the guarantor (me) and take whatever I own to make up for the loan as well as any damages. I am assuming this means any properties i own with this bank, or with any other bank (IF it comes down to that)

    Is this standard? Should i be engaging with the solicitor i am also engaging with as my conveyancor AND trust executor or should i be engaging with someone completely independent to get the best advice? Does that separation of solicitor matter?
     
  4. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,130
    Location:
    03 9877 3000
    Conveyancers can't give legal advice of this nature, you need to take it to a solicitor.

    IMO it's a bit dumb because the guarantor is required to get legal advice to ensure they're not been taken advantage of by the borrower. With the structure described, the guarantor and borrower are effectively the same individual. The bottom line is that if the loan isn't repaid, the bank will recover their money from the same individual.

    The documents described are common place for this ownership structure.
     
    Gypsyblood likes this.
  5. RPI

    RPI SDA Provider, Town Planner, Former Property Lawyer

    Joined:
    18th Jun, 2015
    Posts:
    2,025
    Location:
    Brisbane
    Is there a "Certificate of Independent Legal Advice"
     
  6. Gypsyblood

    Gypsyblood Well-Known Member

    Joined:
    12th Dec, 2016
    Posts:
    522
    Location:
    Melbourne
    Hi, yes there is
     
  7. Gypsyblood

    Gypsyblood Well-Known Member

    Joined:
    12th Dec, 2016
    Posts:
    522
    Location:
    Melbourne
    Absolutely, i get that in theory, its how things should be. The thing that is a bit concerning though is how it explicitly states that my PPOR or any other property can also be accessed by the bank. In a normal mortgage, if i have not crossed the properties AND i have them with separate banks, there is a degree of control i can exercise on which property the banks can touch? Or is that me being naive and thats not the case?

    All of this is assuming worst case, hopefully i will never come to that with my buffers and contingencies in place. Still, its good to know what the worst can come to!
     
  8. Gypsyblood

    Gypsyblood Well-Known Member

    Joined:
    12th Dec, 2016
    Posts:
    522
    Location:
    Melbourne
    My conveyancer is a lawyer as well. He just handed the conveyancing part to one of his team members and he is the one who helped set the trust structure up. In that case, should i be okay to ask him to review this and will that be considered "independent solicitor advice"?
     
  9. RPI

    RPI SDA Provider, Town Planner, Former Property Lawyer

    Joined:
    18th Jun, 2015
    Posts:
    2,025
    Location:
    Brisbane
    Then that will need to be separate lawyer. The lawyer is acting for the trustee - not you. You are providing guarantee to the loan. You need a separate lawyer (different firm) to provide certificate of independent legal advice. They need to advise you what happens if the trustee fails to meet their obligations. Lawyer will need to read all of the loan docs. Some of these certificates require the lawyer to sign that they saw you in person and you provide identification of this type and this document number.
     
  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,667
    Location:
    Australia wide
    As a guide I used to charge $660 for this sort of legal advice. I don't do these anymore as it needs to be done face to face.

    And it would be unusual for the documents to specifically refer to your existing properties - although these would certainly be at risk if the trustee defaulted.
     
    Gypsyblood likes this.
  11. Gypsyblood

    Gypsyblood Well-Known Member

    Joined:
    12th Dec, 2016
    Posts:
    522
    Location:
    Melbourne
    @RPI @Terry_w any lawyer recommendations in Melbourne north guys?
     
  12. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,130
    Location:
    03 9877 3000
    Phillips & Wilkins
    03 9480 1155
    823 High St, Thornbury

    They've done this for me a couple of times.
     
  13. Gypsyblood

    Gypsyblood Well-Known Member

    Joined:
    12th Dec, 2016
    Posts:
    522
    Location:
    Melbourne
    Thanks a lot!
     
  14. Gypsyblood

    Gypsyblood Well-Known Member

    Joined:
    12th Dec, 2016
    Posts:
    522
    Location:
    Melbourne
    I called them up this morning, apparently if they are not the conveyancer they wont do this document as well as its too much risk? @Peter_Tersteeg From @RPI above i thought the whole idea was that they are separate solicitors?
     
  15. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,130
    Location:
    03 9877 3000
    Sorry to hear that @Gypsyblood they've done this for me but I've known some of their solicitors for years.

    I don't believe the banks have any requirement for the advice to come from a third party. For myself in these circumstances, this is a formality to get resolved. If your conveyancer can't help, ask them if they can recommend someone who will.
     
  16. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,667
    Location:
    Australia wide
    Is there a conflict of interest with this?

    Possibly because if the lawyer as acting as conveyancer for the trustee then they are the trustee's lawyer. If they then act for you as a guarantor for the loan then they are your lawyer for the same transaction. They are acting for both sides in the same matter.

    It is up to the lawyer to decide whether to take this risk. Not something that I would do.
     
  17. Gypsyblood

    Gypsyblood Well-Known Member

    Joined:
    12th Dec, 2016
    Posts:
    522
    Location:
    Melbourne
    Dont be sorry, you offered to help! Thanks thats a good idea
     
  18. Gypsyblood

    Gypsyblood Well-Known Member

    Joined:
    12th Dec, 2016
    Posts:
    522
    Location:
    Melbourne
    Yes thats what i am wondering. To me, there is a loop hole. The document states that it should be an unrelated party however, i am the guarantor of the trust company i have set up to buy. We are all one and the same. So there aren't two separate people to represent? confusing. However i guess long term the directors of that company can change so they mitigate against that possibility by making it a clear distinction between guarantor and trust company?
     
  19. Gypsyblood

    Gypsyblood Well-Known Member

    Joined:
    12th Dec, 2016
    Posts:
    522
    Location:
    Melbourne
    Also whats the risk if you dont mind sharing a bit more detail? @Terry_w
     
  20. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,667
    Location:
    Australia wide
    Risk is that the lawyer will be liable for any loss suffered by the lender if the guarantee is unenforceable