In contrast to the Delaware SPE Opinion, which is limited to Delaware law, the bankruptcy remote opinion is designed to address what may happen regarding a petition to file for federal bankruptcy. Usually, these SPE LLCs have one or more independent directors, who may also be called special members or springing members and who are non-equity members whose role is to make sure the loan continues to be serviced by standing in the shoes of the equity member should the parent entity declare bankruptcy. The idea is to keep the borrower property from being drawn into its parent company’s bankruptcy estate. This provides assurances to the lender that the lender will receive tenant rents without interruption in almost any circumstances. The bankruptcy opinion is known as a “reasoned[ZB1] opinion” in that it cites case law to support it.

Often, these opinions are requested to be delivered in coordination with an imminent closing date four weeks away. We at The Williams Law Firm, therefore, are conscious of this and promptly deliver drafts to Lender’s counsel after the entity and loan documents are finalized. Also, our fees for these opinions are usually negotiated, fixed, and paid at closing. For a single borrower entity with a loan amount under $20 million, we often quote $4,000 for up to 20 hours of services, which is paid at closing. This is a fraction of what the large Delaware firms charge for equivalent opinions.

These opinions do not require independent factual verification on the part of the Delaware counsel. Instead, the opinion is limited to document review and reliance on what may be certificates prepared by third parties.

Occasionally, non-consolidation opinions are also required. These are known as “non-con” opinions. They are usually prepared by counsel outside of Delaware.

While some attorneys not licensed in Delaware attempt to give Delaware opinions, it is a better practice to have a Delaware attorney familiar with LLC law to render these opinions. That helps to ensure the opinion is consistent with Delaware practice and law, which may not be familiar to lawyers outside Delaware.

The use of these opinions are limited to the party to whom they are addressed. The purpose is to make sure the loans meet certain requirements to make their performance predictable enough to have the loan bundled with other similar loans to be sold as securities on the open market. The result is that the borrowers using these CMBS loans are able to obtain more favorable rates than traditional bank financing.

Legal opinion letters are a statement between an attorney and the attorney’s client, and provide a professional opinion regarding specific legal matters outlined in the letter. It does not provide a legally binding agreement or guarantee, and cannot be treated as such, but it does provide a measure of comfort to the lender. Please contact The Williams Law Firm for a quote on your particular transaction. Usually, the fee is based on the number of entities involved, amount of the financing, and the urgency of timing. We look forward to helping you.