We are taking out a private mortgage as a secondary form of financing and our lawyer who we retained has indicated that we need to obtain independent legal advice. Why do we have to go to another lawyer when we have already retained and paid for one lawyer?
The issue here is that your lawyer is representing you as well as the private lender because they are giving both parties an opinion as to the title of the property. The lawyer needs to make sure that the title is clear and there are no unusual liens or problems with the property. This is standard procedure as it does not make sense for you to hire two lawyers to do exactly the same tasks. You would end up paying for both lawyers services that would be more expensive than simple independent legal advice.
Normally, when your lawyer acts for a bank with your mortgage, you do not have to obtain independent legal advice but due to the fact that private mortgages are usually at a higher rate of interest and are often second mortgages, the Law Society of Upper Canada felt that they needed special consideration. Any private mortgage over $50,000.00 requires you to obtain the advice of an independent solicitor who will give you information with respect to the potential mortgage so that you are very clear of matters such as the specific interest rate, the term of the mortgage and whether it is closed or open.