Dual Instructions

An Overview to Dual Instruction

The Solicitors Regulatory Authority or SRA sets out the rules of conduct for solicitors and who they are allowed to act for and who they cannot. We take a look at dual instructions in the context of a banking and finance

So what is a dual instruction?

A solicitor acts for both parties to a transaction, for example a Borrower and a Lender.  The SRA rules are very clear on the matter and the type of transactions where dual representation can work are quite rigid.

A solicitor can only act on a dual instruction basis if they are satisfied that there is no conflict and both the lender and the borrower agree to the guidance as set out by the SRA.

How does it work?

The nature and structure of the transaction in relation to the commercial terms, facility amount, and the documents being used to secure the liabilities of the borrower will need to be established prior to a dual instruction commencing.  Only the use of standard documentation is considered viable for use with a dual instruction.

The solicitor is not able to advise one party in favour of the other.   They can, however, jointly recommend a course of action or solution to a potential problem provided that they are not biased to either party.  Substantive amendment or negotiation of documentation is outside of the scope of a dual instruction.

The solicitor is not permitted to advise a third party security provider and any such individuals or entity (such as an individual or corporate guarantor) will need to engage completely separate and individual representation.  The solicitor could, however, act as a post-box between the security provider and the lender.

If a legal mortgage is part of the security package any certificate of title will need to be produced in a standard form as approved by the Law Society and the Council of Mortgage Lenders.

Once it has been established that it is appropriate for a solicitor to act on dual instruction documentation can be drawn up and circulated to both parties.  The documentation is then returned to the solicitor acting and conditions precedent can start to be marked as satisfied in order to progress the transaction to completion.  Once all conditions precedent have been satisfied the parties can jointly agree on a mutual completion date.

Advantage or disadvantage?

Provided that the commercial terms,  documentation and facility itself are all agreed ahead of an instruction being given, it is in the interests of both parties and that that are no conflicts a dual instruction can be very beneficial to both Lender and Borrower.

There is one solicitor in control of the entire process who is able to liaise simultaneously with both parties to the transaction which reduces costs for both and can greatly improve efficiency.

When a conflict arises, however, or if the nature of the facility varies or requires amendment it may prove difficult to continue a dual instruction without favouring one party over the other.  Another solicitor may need to be introduced to advise either the lender or the borrower which could increase cost for the borrower.

If the standard documentation provided by the Lender is not specific enough for a particular borrower’s requirements and requires extensive negotiation then a dual instruction will not be suitable.