The quick read: On most commercial real estate loans no rule forces you to hire your own lawyer, but the lender will almost always have counsel, and the loan documents and program rules usually put that bill on the borrower. HUD-insured multifamily loans are the clear exception: they require an Opinion of Borrower's Counsel on HUD's own form. Because you are paying for the lender's lawyer anyway, most borrowers treat their own counsel as the cheaper half of the legal budget. This page is general information about who does what, not legal advice; your own attorney should read your documents.
SBA 7(a) lender legal fees: the lender "may charge the Borrower for legal services rendered on an hourly basis" (13 CFR 120.221(e))
SBA 504 closing: the CDC may charge a closing fee to reimburse "its in-house or outside legal counsel" (13 CFR 120.971(a)(2))
HUD-insured multifamily: the Opinion of Borrower's Counsel format "must be followed and is not open to negotiation" (HUD-91725M instructions, OMB exp. 12/31/2027)
Fannie Mae multifamily: "Borrower-paid legal fees incurred on your behalf" appear among the acquisition costs a lender may count toward value on a property bought less than 12 months before commitment (Fannie Mae Multifamily Selling and Servicing Guide, Section 202.03C, effective 09/28/2026)
This guide covers legal counsel only. It does not restate full closing costs or name any firm. For the terms that drive most of the legal negotiation, see what to watch in a CRE term sheet.
Is a borrower legally required to hire a lawyer for a commercial real estate loan?
Usually no general rule requires a commercial borrower to retain its own attorney, but several government-backed programs build counsel into the closing itself, and the lender nearly always has a lawyer drafting the documents. The practical question is less "must I" than "who is reading these documents for me before I sign them."
The clearest requirement we found is HUD's. For HUD-insured multifamily loans, the borrower's lawyer signs a standard Opinion of Borrower's Counsel (form HUD-91725M), and HUD's instructions say the agency "regards the Borrower's Counsel as essential to the process" of preparing and executing the closing documents (HUD-91725M instructions). The instructions also note that the lender's counsel may rely on that opinion for parts of its own (HUD).
SBA 504 loans put the legal requirement on the Certified Development Company rather than on you. SBA's SOP 50 10 8.1, effective October 1, 2026, says "the CDC and its attorney are ultimately responsible for the 504 Loan closing," and CDC counsel must sign a form Opinion of CDC Counsel certifying it is a licensed, active member in good standing of the applicable state bar (SBA SOP 50 10 8.1). That lawyer protects the CDC and SBA, not the borrower.
For bank, CMBS, bridge and DSCR loans, we found no public rule that requires borrower counsel. Whether you hire one is your decision, which is why the rest of this page focuses on what that decision costs and buys.
Who has a lawyer at the table on each type of commercial loan?
The pattern across loan types is consistent: the lender or the program has counsel on every deal, the borrower is often billed for it, and only HUD makes the borrower's own lawyer a mandatory part of the closing package. The table below sorts each loan type by what the public rule actually says.
| Loan type | Lender-side counsel | Who pays lender-side counsel | Borrower's own counsel | Source (date on page) |
|---|---|---|---|---|
| Bank loan | The OCC handbook mentions counsel in specific cases: exam procedures ask whether construction loan documents are reviewed by counsel for building-code conformance, and for ground-leased properties banks often engage counsel to review the lease and draft loan documentation | Not set by the OCC handbook; the commitment letter's expense clause decides | Not required by the handbook | OCC Comptroller's Handbook, CRE Lending (Version 2.0, March 2022) |
| SBA 7(a) | Lender may use in-house or outside counsel; legal fees must be for work by a licensed attorney or someone under one's direct supervision | Lender may charge the borrower, hourly only; in-house counsel reimbursement may not exceed the cost of outside counsel | Not required by the sections reviewed | 13 CFR 120.221; SOP 50 10 8.1 (effective 10/01/2026) |
| SBA 504 | CDC counsel closes the loan and signs the Opinion of CDC Counsel | CDC closing fee reimburses in-house or outside counsel; the SOP's fee table marks it "Paid by Borrower" | Not required by the sections reviewed | 13 CFR 120.971; SOP 50 10 8.1 (effective 10/01/2026) |
| HUD-insured multifamily | Lender's counsel may rely on the borrower's opinion | Not addressed on the forms reviewed | Required: Opinion of Borrower's Counsel on form HUD-91725M | HUD-91725M; instructions (OMB exp. 12/31/2027) |
| Fannie Mae multifamily | Not addressed in the section reviewed | Guide lists "Borrower-paid legal fees incurred on your behalf" among acquisition costs, within a 3% of acquisition price limit, for properties acquired less than 12 months before commitment | Not addressed in the section reviewed | Fannie Mae Guide, Section 202.03C (effective 09/28/2026) |
| CMBS, bridge, DSCR, private | Set by each lender | Set by the term sheet or application; no public rule reviewed | No public rule reviewed | No agency rule; read the expense clause |
Read the table as what each published rule says, not as a full description of market practice. Where a cell says "not addressed," the rule we read is silent, and the loan documents decide.
Why does the borrower usually pay the lender's legal fees?
The borrower usually pays because the lender treats document preparation as a cost of making your loan, and both the program rules and the standard expense clause in a commitment letter allow the lender to pass it through. For SBA loans the permission is written into federal regulation, which makes it a cost to plan for rather than a surprise.
The SBA rule for 7(a) loans is direct: unless SBA program requirements say otherwise, the lender may collect only listed fees, and one of them is legal services "rendered on an hourly basis" (13 CFR 120.221(e)). The SOP adds that the lender "may not pass on to the Applicant/Borrower any cost of legal services not calculated on an hourly basis" (SBA SOP 50 10 8.1). So on a 7(a) loan, a flat legal fee passed through to you is a question worth asking about.
On a 504 loan, the regulation lets the CDC charge "a reasonable closing fee sufficient to reimburse it for the expenses of its in-house or outside legal counsel, and other miscellaneous closing costs" (13 CFR 120.971(a)(2)). The bank or other third-party lender on the first-lien piece has its own documents too, so a 504 borrower can see legal charges from two lender-side sources.
Fannie Mae's multifamily guide is written to its lenders, and it lists "Borrower-paid legal fees incurred on your behalf" among the acquisition costs that may count toward value when the property was acquired less than 12 months before the commitment, as part of costs capped at 3% of the acquisition price (Fannie Mae Guide, Section 202.03C). The guide treats the borrower paying the lender's legal fees as an ordinary line item.
Outside those programs, the term sheet or commitment letter controls. Some lenders collect a deposit at signing to fund third-party reports and legal work; whether any of it comes back depends on the document, which our guide on whether banks require deposits for a commercial loan covers.
What should your own lawyer review in commercial loan documents?
Your own lawyer's job is to find the provisions that can cost you money or personal assets after closing, because the lender's counsel drafted every one of them to protect the lender. Five areas carry most of that risk on a typical commercial loan, and each is worth a specific question before you sign.
Guaranty: whether you are signing a full payment guaranty, a limited guaranty or a carve-out guaranty, and what triggers it. See our glossary entry on the personal guaranty.
Recourse carve-outs: on a non-recourse loan, the list of "bad acts" that turn the loan into full recourse, and whether any can be triggered by events outside your control.
Cash management: whether a lockbox or cash sweep can switch on, what trips it, and how you get cash back once the trigger cures.
Single-purpose-entity covenants: the restrictions on what the borrowing entity can own, do and owe, and what a breach costs you.
Prepayment: yield maintenance, defeasance or a step-down schedule, and how much it would cost to sell or refinance early.
None of these is unusual, and none is necessarily unfair. The point of having your own counsel is that someone on your side reads them against your actual business plan before the documents are final.
How can a borrower keep the lender's legal fees from running open-ended?
The most effective lever is the term sheet itself, because the expense clause is set there, before the lender's counsel has started billing and while you still have competing offers to compare. Once the commitment is signed and the deposit is posted, the borrower's negotiating position on legal costs is much weaker.
Ask for a legal-fee cap. If the term sheet says the borrower pays the lender's legal costs, you can ask the lender to cap them or to quote an estimate in writing. A lender can decline, but the answer tells you how the bill will be managed.
Ask how the deposit is applied. If legal work is funded from a deposit, ask what happens to any unspent portion if the loan does not close.
Ask about hourly billing on SBA loans. On a 7(a) loan, the regulation and SOP require legal charges to the borrower to be on an hourly basis (SBA SOP 50 10 8.1).
Hire counsel early. A lawyer who reviews the term sheet before you sign it can often prevent the document fights that drive both sides' legal bills up later.
Budgeting legal costs on a commercial loan?
If you are budgeting the legal side of a commercial real estate loan, the useful first step is to see more than one term sheet, because the expense clause, the deposit terms and the guaranty structure differ by lender and are cheaper to compare before you sign than to renegotiate afterwards.
YieldStack is a commercial mortgage brokerage, not a lender. It costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing. Every credit decision is made by the lender; YieldStack arranges the introductions and negotiates on the borrower's side, and no loan, rate, or closing is guaranteed. Submit your deal and compare lender terms, including how each handles legal fees, before you commit to one. Your own attorney should still review the documents you choose to sign.
The bottom line
You are rarely required to hire your own lawyer for a commercial real estate loan, except on HUD-insured multifamily loans, but the lender will have counsel and you will usually pay for it. SBA rules expressly let lenders and CDCs pass legal costs to the borrower. Negotiate the expense clause at the term sheet, and have your own counsel read the guaranty, carve-outs and prepayment terms.