Originally published by Marilyn C. Maloney.
A Lender in a real estate financing transaction often requires borrower’s counsel to opine on certain aspects of the transaction as a condition to the closing. Often, the negotiations between borrower and lender counsel are as contentious and extended as are negotiations regarding the loan documents themselves. The respective attorney opinion committees of the American College of Real Estate Lawyers, the American College of Mortgage Attorneys, and the Real Property, Trust and Estate Law Section of the American Bar Association have worked for years to produce opinion reports that are fairly balanced between the needs of lenders and borrowers and that can reduce the negotiations over real estate finance opinions. The first opinion report specifically addressing financing opinions in real estate transactions was the Real Estate Opinion Letter Guidelines published in 38 Real Prop. Prob. & Tr. J. 241 (2003). The next report was the comprehensive The Real Estate Finance Opinion Report of 2012 published at 47 Real Prop. Tr. & Est. L. J. 213 (2012) and The ACREL Papers 121 (Spring 2013). The Local Counsel Opinion Letters – A Supplement to the Real Estate Finance Opinion Report of 2012, 51 Real Prop. Tr. & Est. L. J. 167 (2016) directly addresses the particular issues facing local counsel in real estate finance transactions. The latest report, just published at 53 Real Prop. Tr. & Est. L. J. 163 (Fall 2018/Winter 2019), is Uniform Commercial Code Opinions in Real Estate Finance Transactions (the “UCC Opinion Report”). In addition to accessing these reports in the Real Property Probate and Trust Journal, the Legal Opinion Resource Center of the ABA Business Law Section contains these and many other opinion reports and resources.
The principle behind a UCC Opinion Report drafted specifically for real estate lawyers is that while many real estate financings involve only a deed of trust or mortgage and an assignment of leases and rents, many others will involve UCC collateral, such as fixtures, as-extracted collateral, timber to be cut, deposit accounts, and investment property. While the UCC Opinion Report may not replace other reports of various working groups designed purely for the most sophisticated UCC financings, it provides a detailed explanation of applicable UCC laws regarding creation and perfection of security interests in those types of collateral most often included in real estate financings and includes a representative form of opinion for UCC opinions. As the UCC Opinion Report notes that priority is not typically covered in UCC opinions (at least in most real estate financings), it does not provide a deep dive into many priority issues.
Real estate counsel will find the UCC Opinion Report a good addition to the existing reports that can assist in streamlining the contentious opinion negotiation process. For additional background on the report, see “UCC Opinions in Real Estate Financings.”
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