CHAPTER 15.08. Mortgage Lien Creation

• Jurisdiction: United States

15.08. Mortgage Lien Creation

With increasing frequency, opinion recipients request opinions in real estate financing transactions with respect to the creation of the mortgage lien by the mortgage included in the transaction documents. It is generally understood that opinions on title, creation, perfection, and priority of liens are not appropriate opinion requests, and of course those aspects of the mortgage are adequately covered by title insurance in Delaware.¹³⁴ On the other hand, even though title insurance addresses the issue, it is not necessarily unreasonable (at least when the opinion giver is acting as local Delaware counsel and the lender does not have Delaware counsel) to request an opinion regarding the legal sufficiency of the security document, as a form, to create a lien and whether the security document is in proper form to be recorded in the recorder of deeds office.¹³⁵

The mortgage lien creation opinion includes three components: (i) the mortgage is in proper form for recordation in the land records; (ii) the particular mortgage satisfies requirements to create a mortgage lien on the real property collateral; and (iii) proper recording of that mortgage is sufficient to establish notice to third parties of the lien on the real property collateral and other recordings are not necessary for that purpose.

[1] Proper Form of Mortgage Instruments for Recordation

The mortgage lien creation opinion states that the mortgage is in proper recordable form under applicable laws. In other words, does the mortgage comply with the applicable legal requirements of the recorder of deeds in the applicable county of the State of Delaware where the opinion giver understands or is advised by the opinion recipient the document will be recorded? The difficulty with such an opinion is that many of the requirements for recordable form are set forth in local, uncodified rules and often depend on variable facts. For example, if a recorder of deeds in Delaware requires a certain font size or certain margins in documents to be recorded, the font or margin size of the document the opinion giver reviews for the opinion may change when the same document is reproduced for execution and recording. However, for purposes of a Delaware opinion letter, local laws are excluded from the applicable Delaware laws on which the opinion giver is opining.¹³⁶ Accordingly, the review for purposes of issuing the opinion should be limited to the requirements of state law; the particular...