Clients sometimes do not have adequate liquid assets to fund our fees. This is especially common in divorces where the assets are tied up in the marital home or rest only in one spouse. There are a range of funding options and you should discuss these with your client openly, but without recommending any particular option.
Divorce finance is becoming popular and your client may well ask you for further details about it. We can explain generically, but we cannot recommend any particular lender. We not only don't have the skill set, but we also don't have the FCA authority to be arranging or recommending loans.
You should note that in order to get the loan, you will have to warrant to the lender that:
You will also have to complete parts of an application form with the client. You will need to be careful what you say in it. Where you provide facts, you are giving a warranty in the terms that the information you give is accurate and complete, so far as you know. Where you provide an opinion on the likely outcome, you are giving a warranty that what you say to the lender is the same as what you have said to your client.
To protect yourself and the firm, if the client cannot or does not wish to self-fund their fees, then you should send an email along these lines:
"You have told me that you would like to arrange third party financing to help you cover your legal costs. The Money Advice Service wrote a good article on the various options open to clients in connection with anticipated legal fees and you can find it here. It includes a section on divorce finance. If you do wish to seek divorce finance from a specialist lender, then I can confirm that we are registered with a few such lenders.
As your solicitor, I am not able to arrange finance for you, or to advise you to take finance. Any decision you make must be yours, or if you need financial advice, then you will need to consult a regulated financial adviser. Whether you go down this route is a matter for you and depends on your circumstances and attitude to risk. There are a number of lenders active in this market. I have come across a few, including [Rhea Family Finance and Level]. These and other lenders are quite easy to find using an internet search. You should compare and contrast their differing offerings and make a careful decision if you wish to take such a loan and if so, from which lender.
If you do decide to use divorce finance, then the lender will ask us both to enter into a series of legal documents to arrange the loan. As my firm will be a party to those documents we are, so far that that agreement is concerned, not independent and as a result we cannot advise you on the terms of the loan and any associated documents, including any assignment of your claim that you may be required to provide. We suggest that should take legal and financial advice before committing to any loan and any supporting documents. You may find that the loan impacts very significantly on any return you hope to receive. You should also bear in mind that, if you borrow in this way, I will then owe your lender an obligation to keep them updated and to provide some information to them as part of the application process. I will charge you at my normal rate for this work.
Your application will contain a number of statements from you, these must be true and a number of promises from you, you must keep these. Failure to do so, is a breach of the loan and may cause the lender to take legal action against you. The loan agreement also contains other onerous obligations on you. I will also be asked to complete part of the application form to tell you lender about your case. You must be truthful and accurate with me so I can do so. You must check the application form and confirm it is true accurate and complete in all respects before it is submitted.
Once you have selected your preferred way of financing the divorce, please let me know."
The client will in due course let you know who they have chosen. At that point you need to send them a copy of the relevant terms (see "Lenders" below) by email in terms such as this:
"I understand that you have applied for funding from [name of lender]. I attach the terms they require of this firm before they will fund your case. [I also attach the undertaking I will be required to give before they will lend to you.] Please review carefully. If you have any questions, then you should contact me and I can explain how the arrangement will work. As I have said before though, if you are not entirely happy with the terms, then you might need to take independent legal advice on whether to ask for the terms to be changed, and if so, how. As we are a party to these terms, we are regrettably not able to negotiate them for you. Once you are ready and before you borrow any funds you must reply to this email to confirm irrevocably that:
The lender has given you a lawyer's instruction letter and you have sent this to us. We will follow your instructions. As a client you are at liberty to change your instructions, but you should note that if you do, we may no longer be able to act for you and you may breach your obligations to the lender, on which we are not advising you.
Finally, I need to remind you that the lender will form its own decision as to whether to lend. I don't have any control over that. You should bear in mind that your application might be rejected."