What must the lender's lawyer verify if the borrower is a corporation?

When a lender's lawyer is dealing with a corporate borrower, a critical aspect of the due diligence process is to confirm that proper corporate documentation exists for authorization. This ensures that the corporation is legally empowered to enter into the mortgage or loan agreement in question.

Corporate governance typically requires that decisions made by the corporation, particularly those involving significant financial commitments like borrowing, are authorized by the corporation’s bylaws or through board resolutions. This verification involves checking that the individuals who are signing the loan documents on behalf of the corporation have the authority to do so. If these formalities are not properly followed, the corporation may later dispute the validity of the loan or the obligations it incurred, leading to potential legal complications for both the lender and the borrower.

Addressing the other options helps to clarify why they are less critical in this specific context. While assessing a corporation's financial status, ensuring the property is free of liens, and verifying adequate insurance can be important components of a comprehensive risk assessment process, they do not directly relate to the legal authority of the corporation to borrow. Thus, confirming proper corporate documentation stands out as the essential verification step for the lender's lawyer, ensuring that all corporate formalities are correctly observed before proceeding with the financing.