At the closing of a personal property secured transaction, legal counsel for the borrower often delivers an opinion to the lender concerning the security interests in the borrower’s personal property the borrower has granted to the lender. At the time, the parties typically consider whether a Security Interest Opinion is necessary and, if so, the professional best able to render such an opinion. There are various considerations in making this assessment.
First, an attorney should not request an opinion that he or she would be unwilling to state. Second, a lawyer should not request an opinion in an area of substantial legal uncertainty. Third, a lawyer should not request an opinion if the delivery of the opinion is unreasonably costly based on the size of the transaction and the relative benefit provided by the opinion, especially if the opinion will be subject to extensive qualifications and exceptions.
Parties to secured transactions like lenders and their legal representatives must act reasonably in assessing whether there is a necessity or even reasonable justification for a Security Interest Opinion. This is especially true today based on the increased ease in which perfection may occur and the greater uniformity in personal property secured transactions law as a result of revised Article 9′s almost uniform adoption throughout the United States.
It is currently a common practice based on reasons mostly related to efficiency for the debtor’s lawyer to provide a Security Interest Opinion at the closing of the transaction. There are exceptions which may necessitate the consideration of whether the secured party’s lawyer is in a better position to provide the Security Interest Opinion.
A Security Interest Opinion does not address choice-of-law issues unless expressly addressed in the opinion, and, as a result, does not address which state’s law governs perfection, as well as the effect of perfection or nonperfection or the priority of any security interest. If the law of some other jurisdiction may apply to the transaction, it may be necessary to obtain legal counsel in this other jurisdiction to give or supplement the Security Interest Opinion.
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