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Feeding local opinion counsel a full plate of information early in the engagement will help local opinion counsel take some of the heat off of borrower’s lead counsel during the typical hurry-up-and-wait process of getting through to the closing of the loan transaction. Efficiency in providing an opinion letter on a state's laws that are applicable to a loan transaction requires that borrower’s lead attorney serve local opinion counsel more than just bite-sized bits of information about the parties involved and more than just a taste of the overall transaction.
Part of the appeal of serving as local opinion counsel is not having to manage all the makings of the closing (multiple conference calls, updating the checklist, processing sets of signature pages, negotiating the minutiae of the loan agreement, etc.). A disadvantage of being just “local counsel” is the lack of direct contact with the client and the lender’s counsel further up the food chain. The details and confirmations relevant to preparing the local opinion are typically dished out through layers of communication before borrower’s lead attorney can provide what local opinion counsel needs.
One key is to provide a full bag of ingredients so local opinion counsel can really start cooking on the opinion letter. Borrower’s lead attorney should take responsibility to hunt down, gather and serve the necessary information, rather than expect local opinion counsel to piece together the transaction bite by bite and have to ask question after question. If well-provisioned, local opinion counsel can be in better shape to meet deadlines, keep fees down, and reduce comments from lender’s counsel.
Here is a menu of things borrower’s lead counsel should bring to the table:
- Provide the full formal names, addresses and jurisdiction of formation of the borrower, co-borrowers, guarantors and lenders so local opinion counsel can run a check for conflicts of interest. Some lender clients of local opinion counsel may even require the identity of the loan officer and business unit of the lender involved in the loan if processing a waiver of a conflict of interest is needed - information that is nearly impossible for local opinion counsel to obtain on its own.
- Provide a description of the specifics of the loan transaction and a list of the loan documents by name and parties – particularly for consistency among opinions in a financing that requires local opinion letters from multiple states. That will save time and money in the drafting of each local opinion and in the lender’s review of and comments on each local opinion.
- Identify the address of the property involved and the county where the property is located. Local opinion counsel might need to do limited research on the property to confirm the proper recording offices and review local idiosyncrasies. Detailed information served up to local opinion counsel should save time and money, with savings multiplied if multiple properties are involved.
- Determine who is to provide the opinions on UCC filings and entity authorization under Delaware law or the law of some other state in which the borrower is formed. Some local opinion counsel can handle those opinions for another state - particularly Delaware - but reviewing entity documents and preparing resolutions might duplicate the work of borrower’s lead attorney. In a multi-state transaction, borrower’s lead attorney should provide those opinions separately and directly, thus covering them in one place for the lender and allowing all local opinion counsel to assume those matters as needed for the local opinions.
- Determine who is to order the certificate from the Secretary of State that confirms the borrower is authorized to transact business in the local state. Provide a copy if that has already been obtained or instruct local opinion counsel to obtain it. Determine who should obtain an updated certificate if one goes stale because of a delay in the closing date. Local counsel is often easily able to obtain this certificate, and good communication can avoid the extra cost of duplicated and last-minute efforts.
- Determine early on from lender's counsel whether there will be a separate UCC financing statement filed locally as a fixture filing, or whether the real estate security instrument to be recorded locally will suffice as the fixture filing, as is the case in most states. The format of a local opinion letter varies depending upon which approach is used, and making a later revision to add or delete reference to the separate UCC financing statement in the opinion increases the cost.
- Provide an example of the proposed signature blocks for the parties. Some states have particular requirements for signatures and notary forms. Borrower’s lead counsel sometimes sends out a set of signature pages to be signed in advance, maybe even before the actual documents have been provided and reviewed. It will cost time and money to repeat that execution process if changes are needed to meet local requirements.
- Share the example of the opinion letter from any other local counsel who may have been the first to submit a draft and get lender comments. In a multi-state transaction invariably one local opinion counsel gets the opinion letter drafted and reviewed well in advance of the others, but rarely does borrower’s lead counsel think to share that with the others. Circulating that should save time and money in the preparation of the other local opinions and should help conform them to the lender’s requirements, even if there are variations from state to state as to what opinion provisions and exclusions are considered standard.
- Determine early on from lender’s counsel how many “wet signature” originals of the opinion letter are needed and where those need to be sent upon closing. Knowing that in advance helps with logistics when the local opinion letter needs to be printed, signed in ink by an authorized signatory, stuffed in a FedEx envelope, and timely dropped off for delivery on what is usually very short notice.
- Keep local opinion counsel timely informed of the targeted closing date and revised dates. Normal rescheduling can be tolerated and factored in when preparing a quote or invoice, but last-minute rushes, stop and start closings and silence are not always easy for local opinion counsel to digest and can add to the costs of services to the borrower.
- Provide local opinion counsel a set of the final, executed documents as the final course.
Simply put, a well-provisioned, well-fed local opinion counsel should be well equipped to deliver a well-done local opinion.