A letter from borrower's counsel opining that the borrower is duly formed, the loan documents are authorized, and the obligations are enforceable.
The longer version
Standard opinions cover due formation and good standing, power and authority, due authorization and execution, enforceability subject to customary qualifications, and no conflict with organizational documents or known litigation. Larger deals add non-consolidation or Delaware single-member opinions.
Opinion negotiation runs between counsel late in the closing, and the signed opinion is a condition to funding. It belongs in the closing binder next to the organizational documents it relies on.
In Prodeal
In Prodeal it is a checklist line with a status, a due date, and a responsible party. The executed version lands in the deal's document set and carries into the closing binder.
Common questions
- What is a legal opinion in a commercial loan?
- A letter from borrower's counsel opining on matters such as the borrower's existence, its authority to sign, and the enforceability of the loan documents, which the lender relies on at closing.
- Why do lenders require a legal opinion?
- Because those facts cannot be checked from the documents alone. The opinion puts a law firm's professional judgment behind them, especially where the borrower is formed in a different state than the lender's counsel practices.
- Who gives the legal opinion?
- Borrower's counsel, addressed to the lender. Local counsel in the property's state often gives a separate opinion on the enforceability of the mortgage under that state's law.