Question: Have you seen a lender ask for an opinion on a Borrower's authority to enter a ground lease where the ground lease is the collateral for the loan ( along with the typical stuff covered for the loan opinion letter)? Or do they typically rely on the leasehold lender title policy? Thanks!

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I would have no problem giving that opinion so long as it is solely based on resolutions of the borrower, duly authorized and within the authority of the borrower’s charter documents (i.e., certificate of incorporation & bylaws, operating agreement, limited partnership agreement, etc.).

Presumably this is already the case.

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PS: I did 80% lender work at an AmLaw 10 firm (I closed real estate loan originations in every US state) and I would be satisfied with checking those authority issues myself and relying on title insurance.

To force a borrower’s attorney to opine on that issue just gives the lender a claim against the lawyer. Why bother when you have insurance coverage?

(Incidentally, requiring borrower’s counsel to give that opinion is a total dick move!)

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Wouldn’t these be the same documents provided to the title company for the leasehold title policy? Good standing certificate, articles of organization, operating agreement and consent to the transaction (if required by operating agreement?)

If you are stuck actually “opining” this then is there really a risk that your opinion could be proven wrong in the future? If so, then make sure that your opinion includes layers of qualifiers:
- “based on information provided to us by…”
- “based on information currently in our possession”
- refer them to or attach a specific document instead of describing the document
- make sure responses align with your reps snd warranties

Thinking of this last point, in most of our leases we rep and warrant that we have authority to enter into the ground lease. Maybe the lack of this warranty has caused the lender to follow up?

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I haven’t seen this. I read your question and it prompted me to check an opinion from a deal where the ground lease was really important and bound up in the economics of the deal, but we did not give an opinion as to the ground lease itself in that case. We did opine as to the “consent and estoppel” signed by the borrower, ground landlord, and lender, which is more reasonably categorized as a loan document. Hope that helps.

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