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Family law solicitor FAQs

Family law solicitor FAQs

About the loan

How does the loan work?

The loan contract is between Novitas and your client.

The money is drawn down from the loan facility as it is needed and paid directly to your client account to pay outstanding invoices for your fees and disbursements associated with the case. Your client does not have to use the entire loan amount and interest only accrues once the money is sent to your client account.

There is nothing for the client to pay until the case concludes as interest is rolled up on a simple basis i.e. there is no compounding of interest. The client instructs your firm to repay the funding from the proceeds of the settlement.

You will have a dedicated online portal to administer the facility, where you can make new applications, make drawdown requests, and monitor the status of any applications or drawdown requests.

The scheme is only available to clients of approved firms, and Novitas will consider each case individually.

This is a fully recourse loan and the client is always responsible for repayment of the loan. If the loan is not repaid by the client, Novitas or the insurer may ultimately take legal action to recover the loan monies.

How much does the loan cost?

There is no minimum loan period, no early repayment charges and no minimum interest charge.

Our charges are straight forward and transparent

  • The set-up fee is £500 (or 1% of the facility if the loan amount is above £50,000). This can be added to the loan or paid up front.
  • Interest is fixed at 18% per annum or 1.5% per month and calculated on a simple basis, i.e. there is no compounding of interest. Interest only accrues on money drawn down from the loan facility. The loan does not require servicing, which means that the loan funds and the interest can all be paid at the end of the loan. This helps all clients with cash-flow concerns and particularly those with little or no income.
  • Interest is calculated by taking the annual interest rate of 18% (1.5% per month), multiplying by the amount used and dividing by the number of days it has been drawn down. For example, if the client has drawn down £10,000 for 6 months, they will pay £900 of interest in addition to repaying the £10,000.
  • We ask the client to take independent legal advice on the loan documentation, which is typically circa £300 (and cannot be added to the loan).

If the client does not have sufficient security by way of assets in their own name, they may be required to take out insurance provided by Novitas. The insurance premium is 10% plus Insurance Premium Tax of 1.2% (as at 3rd December 2017) of the amount that is drawn down and will be added to the loan. Please note that this insurance does not insure the client against failure to repay the loan.
 

What is the duration of the loan?

We agree a time period for each loan, often based on an event such as the sale of a property or a settlement. While we may put a time period of 12 months on the loan contract from the date of the agreement, we understand that this needs to be flexible and will roll on the loan on a 30-day basis according to your client's individual situation.

In a divorce case, does the client's spouse need to know about the loan?

Yes, but only once the loan is in place. There is a letter the client signs and sends to their spouse's solicitor once the loan is in place saying that they have assigned the proceeds of the divorce to Novitas to repay the loan, after which all proceeds are returned to the client. The loan is paid off using the client's portion of the settlement.

Once approved, is there a time limit for the first drawdown to be requested?

The first drawdown will need to be requested within one year after the cooling off period has been completed. If after two months the Novitas loan has not been used, we will carry out a further credit check.

During the case

Does the client have control over how we use the money?

Yes. Each drawdown request is sent to the client for approval. You can only draw the money from your client account against invoices the client has approved. You can also clear off any outstanding legal bills using the loan, with your client's approval.

How often can we make a drawdown from the loan?

The facility can be drawn down as and when required, provided that the costs are in line with your costs estimate, so that the facility will enable you to reach the final hearing if needed.

Where does the money get sent to?

Funds will be paid directly to the solicitor’s client account to clear any approved outstanding invoices.

Drawdown requests can be made through the online portal which, once submitted, will send an email to your client requiring their confirmation that Novitas can release funds to you. Once approved, Novitas will aim to send funds to the firm's client account within 48 hours.

What happens if the client changes solicitor?

If they wish to change solicitor, the new solicitor would have to be approved on the Novitas scheme before allowing the loan to be transferred. Otherwise the loan will need to be repaid immediately.

What happens if the client reconciles with their spouse?

Even if the legal proceedings cease, your client is still obliged to repay the loan under the terms of the agreement.

Can Novitas stop funding during the case?

Yes, there are circumstances which may mean we stop any further drawdowns from the loan, including but not limited to: 

  • disclosure of subsequent material facts that adversely affect the case
  • solicitor coming off the record
  • solicitor not meeting the undertakings in the Global Terms agreement
  • client behaviour that causes concern about the performance of the loan and its recoverability
  • if there is an extension pending

Settlement

Can the client repay the loan early?

Yes. There are no penalties for paying the loan off early. We calculate interest daily so the shorter the time they have the loan, the less they will pay in interest.

Note that the loan is not a revolving credit facility.

Can the client pay off the loan in instalments?

No, the loan needs to be settled in a single payment once the case has been settled.

In a divorce case, does Novitas take assignment over the proceeds of the financial settlement?

Yes. The client assigns the proceeds of their financial settlement to Novitas. Any lump sum payments or proceeds from a property sale, for example, are used to pay the Novitas loan first before the balance is passed to the client.

What happens if any settlement proceeds are received before financial proceedings have concluded?

Any monies that are paid to the client as part of the financial proceedings are considered proceeds of the financial settlement and therefore must be held on account for Novitas.  If the client requests to use those funds before proceedings have concluded, then the request must be put in writing to Novitas for approval.

Can Novitas ask for repayment at any time?

Any breaches of the loan agreement by the client can result in Novitas calling-in the loan and requiring full repayment of the loan and any interest owing. This can include dis-instructing you as their solicitor without agreement from Novitas or failing to follow advice from their solicitor which impacts our prospects of recovering our funds from the anticipated financial settlement.

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