Commercial real estate third-party opinion letters

Commercial real estate loan and acquisition transactions are often conditioned upon a third-party opinion letter, which outlines the opinion giver’s professional judgment on the myriad legal issues related to the transaction.  Too often, the lawyer requesting the opinion asks for more comfort than is appropriate and the lawyer giving the opinion fails to appreciate the risk in giving the opinion.

When rendering a third-party opinion, practitioners must take measures to ensure the accuracy and completeness of their opinion. Counsel preparing opinion letters face potential liabilities if the opinion is defective and negligence can be shown.

Although several state bar associations have developed guidance on opinion letters for commercial real estate transactions, there is no uniform practice or standard, leaving practitioners to grapple with a number of grey areas that increase liability risks. A lawyer is required to possess the legal knowledge and exercise legal skill which is common to other legal professionals in the area and to exercise that knowledge and skill with reasonable and ordinary care. Liability arises when the opinion is negligently rendered.

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