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IN THE SPOTLIGHT
 | | Joseph A. Ernst, Esquire |
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Joe's primary practice is SBA lending. In addition to his representation of SBA lenders nationally, Joe brings significant real-estate experience to his practice, having represented clients that include national retailers for whom he has handled their retail leasing needs nationwide. In prior positions, Joe has successfully represented national corporations and real estate investment trusts in real estate transactions for development of new shopping centers and redevelopment of existing shopping center, leasing, ground leasing, subleasing assignment and assumption of leases, office leasing for mixed-use retail properties and sales to big box and anchor tenants, as well as general contract negotiations and transactional matters in such areas as construction, finance, store operations, procurement, information technology and marketing and merchandising. He has also successfully undertaken the acquisitions of several retail chains and other companies.
ADMISSIONS:
* Pennsylvania
* Connecticut
To read more about Joe, click here.
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FEATURED ARTICLE
Best Practices: Avoiding the Unauthorized Practice of Law and Lender Liability Claims
By: Jennifer Borra, Esquire
 | | Jennifer Borra, Esquire |
Lenders participating in the U.S. Small Business Administration lending programs often encounter borrowers who are unrepresented by legal counsel for the loan transaction. As a result, borrowers may try to rely on the loan closer, business development officer, and frequently lender's closing counsel for guidance on due diligence items such as the EPC/OC lease, compliance with bulk sales requirements, entity formation issues, and terms of the purchase agreement. In these situations, the question then arises, what is the appropriate response for lender and its counsel?
State laws on the unauthorized practice of law are broad and diverse, and the actions that would give rise to claims of the unauthorized practice of law depend on the jurisdiction. For lenders, the actions which may give rise to a potential claim of the unauthorized practice of law are often asserted in the form of a lender liability claim. Lenders must develop clear policies and procedures with all SBA personnel to avoid assuming an advisory role and inadvertently establishing a fiduciary relationship, which the borrower may rely upon and subsequently sustain damages as a result of the advice, or, any legal documents provided. There is a fine line between counseling a borrower on SBA rules and requirements related to legal due diligence, and providing "legal advice" to supplying the borrower by providing sample legal documents to satisfy needs list items.
Below are suggested practices to avoid the unauthorized practice of law and potential lender liability claims:
- Require use of borrower's counsel for the transaction. Oftentimes, lenders will include this condition in the commitment letter, particularly on larger transactions.
- Remind borrowers that the bank is not in a position to provide legal advice, and any guidance provided related to SBA requirements is solely that, and not a substitute for legal advice by an attorney of the borrower's choosing.
- Ensure the borrower understands that lender's legal counsel represents the interests of the lender only, not the borrower.
- Confer with your legal counsel regarding local state laws, and be sure your closing attorney is aware of state specific prohibitions on attorneys handling transactions outside of their licensed jurisdiction.
- When in doubt, seek guidance from your in-house counsel or your outside closing counsel, and they can assist in communicating with the borrower on any legal requirements.
Ultimately, when the loan defaults, and lenders are pursuing all available remedies, borrowers are also examining all possible defenses to the lender's enforcement actions. By implementing and enforcing policies that provide best practices in communicating with the borrower, lenders will mitigate their risk of engaging in the unauthorized practice of law and the resulting potential lender liability claims.
For more information regarding mitigating lender liability risk, please contact Jen at jborra@starfieldsmith.com or at 267.470.1206.
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EVENTS & SEMINARS
Date: December 6, 2013
Location: Webinar
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WHAT OUR CLIENTS SAY
Michael A. Schwartz / President / DelVal Business Finance Corp.
As President of DelVal Business Finance Corp, a leading SBA 504 lender in Pennsylvania for nearly twenty years, I have utilized several law firms to close our SBA 504 loans.
Without a hesitation, Starfield & Smith have been the best we've worked with. They understand that in the 504 industry "time is money" better than anyone else, and their ability to pull in extra resources when needed has made getting the 504 loan closed a priority for them.
From the attorney's to the support staff, everyone is "user friendly" and the professional staff know the SBA 504 rules & regulations as well as I do (well almost).
Simply put, I highly recommend Starfield & Smith for anything that involves SBA financing. They are the best!
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