Opinion Letter

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21 Aug, 2024

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An Opinion Letter is a written form of communication that conveys the thoughts, beliefs, and understanding of an expert on a party involved in a process involving two or more individuals or entities. It plays an important role in helping lenders decide whether a borrower should be trusted with a loan or not.

These opinion letters normally come from legal professionals who advise and direct the client on a particular subject and to let the recipient know how a deal or situation may affect them legally. They point out legal hazards that the addressee should research and assess further. Letters of opinion are generally non-binding on the parties.

What Is An Opinion Letter?

An opinion letter is a legal document that conveys the judgment, viewpoint, or advice of an expert on a set of facts or a particular transaction.
In accounting, these are issued by auditors that would benefit a company's decision-making process. It plays a vital role in informing investors and stakeholders about the financial health of a company.
The opinion letter shall contain the subject matter dealt with, the facts of the case, the documents reviewed, the law, and the analysis.

Opinion Letter Explained

Opinion letters are sometimes called legal opinions. The meaning can vary in different contexts. In legal terms, it conveys the expert's view on the law as applied to the assumed facts. They are letters issued by lawyers to convey legal understandings and conclusions in the form of opinions.

The letters contain a legal analysis of the transactions involved and inform the addressee of the legal effects they bear. They also convey the associated legal risks that the addressee has to consider. It prevents clients from getting into legal disputes, so the lawyers must do legal research.

These letters also have a significant role to play in credit analysis. Based on the past credit records, the analysts figure out whether a borrower should be approved a loan, or the loan application should be rejected. The lenders, based on these opinions, can either approve or reject a loan application.

Letters of opinion are also required when a written opinion would benefit a company's decision-making process, such as in corporate transactions, mergers, licensing contracts, intellectual property issues, and patent advice. When a company bases its future business decisions on the conclusions of a letter of opinion, concrete documentation can be utilized as support.

How To Write?

The opinion letter shall contain the following details broadly:

The subject matter dealt with (e.g., opinion on a loan agreement)
The facts of the case
The documents reviewed
The law and analysis

It may additionally require the following:

The specific statutes and rules for which an opinion is requested.
A summary of any information pertinent to the opinion being sought. it includes details such as the nature and type of the employer's business, the duties or work schedule of any employees, the amount and nature of any compensation, etc.);
The requestor's email address (to which a request reception confirmation may be sent). The requestor's signature is required if the request is sent by letter.

Examples

Let us understand the concept with the help of some examples.

Example #1

Suppose Dave wanted to buy a house, and even though he looked into the legalities of a real estate purchase, he was still trying to figure out what had to be done. He, therefore, hired a lawyer to provide an opinion. The lawyer now must perform the necessary research, conduct title searches, and provide an opinion letter. Hence, the lawyer looks into the history of possessions of the property and determines if its title is clear. The property will be marketable if there are no pending legal disputes, liens, or other encumbered issues that prevent Dave from buying it. Once the title opinion is clear, he can confidently buy the property.

Example #2

A mortgage loan opinion report for a commercial real estate mortgage loan transaction for a property located in New York was produced by the New York City Bar in 2021.

The details regarding the loan agreement between a borrower and lender have been looked into, and an opinion has been provided.

The process involved the verification of various documents that included:

Loan agreement
A gap note or gap promissory note made by the borrower in the lender's favor.
Assignment of rents and leases made by the borrower in the lender's favor.
Environmental indemnity agreement made by the borrower in the lender's favor (and the guarantor).
Deposit account control agreement, etc.

In addition, to form an opinion, the articles of the organization, certificates of formation, certificates of public officials, etc., have also been examined.

Attorney Opinion Letter vs Title Insurance

Let us understand the differences and applications of both concept:

Basis	Attorney opinion letter (AOL)	Title insurance
Concept	An AOL is a written declaration by an experienced real estate attorney that expresses the lawyer's view on the title to a property. An assessment of the title's clarity and marketability is made after thoroughly examining the title records of the property and any potential problems or faults.	Title insurance is a form of protection that purchasers of commercial and residential real estate and their lenders have against title-related problems that may surface after closing.
Cost involved	AOLs have the potential to be a more affordable title insurance substitute They typically cost less than title insurance premiums because they require the services of an attorney.	As insurance, it offers a remedy in compensation and damages for claims resulting from a title defect. Owner's title insurance is typically more expensive than an opinion due to the added level of security it provides.
Reliability	AOL gives less protection than title insurance.	Title insurance provides a better guarantee than AOL.

Frequently Asked Questions (FAQs)

1. Who typically requests for opinion letters?

An attorney's opinion letter is a formal recommendation or statement of judgment addressed to their client or the institution. It is based on the expertise and knowledge of the professional, who certifies that the client is under the applicable law to the best of their knowledge.

2. How does opinion letter differ from legal advice?

An opinion letter is a formal document, often used to provide an expert's assessment of a specific legal issue, usually for a third party's benefit. It involves a comprehensive analysis of facts and law, resulting in a detailed written statement. In contrast, legal advice is typically more personalized and informal, aimed at guiding a client through legal matters based on their circumstances and needs.

3. How much does an attorney opinion letter cost?

The fees attorneys charge for their legal opinion letterscan vary according to the nature and depth of the matters. Fees can range from a few hundred dollars for relatively straightforward matters to several thousand dollars for complex or high-stakes transactions.