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The Importance of the Etridge Guidance

Wednesday, July 27th, 2016

The Importance of the Etridge Guidance

Lord Nicholls developed the Etridge Guidance in the case of Royal Bank of Scotland v Etridge [2001].

The Etridge Guidance must be used when representing two clients in a purchase transaction who are obtaining a mortgage and one of the clients is using these funds for security in their business.

Providing that there is no conflict of interest, the source of funds can be accounted for and the mortgage offer has been received, a conveyancer is able to act for both clients in such circumstances as well as the lender.

Although a conveyancer will act for both clients jointly, it is essential that independent legal advice is given to the party who is essentially providing security for the other clients’ business. The essence of the Etridge Guidance is that the party providing security makes an informed decision based on the advice received.

In general, it is felt that the relevant advice should be given face-to-face as well as in writing. In recent years many conveyancers operate in a different locality to the clients it represents. In such circumstances it is essential that telephone communications are made prior to putting such instructions in written correspondence.

Unclaimed estatesSuch due diligence is key in respect of such transactions as the lender will also rely on a conveyancer to provide an appropriate service based on the nature of the transaction.

The principle guidelines outlined in the Etridge Guidance must be adhered to even if a client is adamant they do not require the advice as per the recent case of Padden v Bevan Ashford Solicitors [2011].

Therefore, understanding of the transactions implications is crucial when providing the independent legal advice and it must be clear that client fully understands the same. This way a lenders security is secured as it is unlikely an action for litigation will be sought.

Although such practices are particular attentive, such standards should be provided as a minimum as is the case with dezrezlegal Limited.

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