Reliance letters and collateral warranties for planning reports

A technical report addressed to someone else is worth very little to you. If the flood risk assessment, the ground investigation and the ecology survey were commissioned by the previous landowner, or by a joint venture partner, or by your own special purpose vehicle that is about to be sold, the consultant owes a duty in contract to that client and to nobody else. Most reports also carry a disclaimer expressly stating that no other party may rely on them, which closes off the tortious route as well.

So you either get reliance granted in writing or you commission the work again. On a site where the ground investigation cost tens of thousands of pounds, that is a real number, and it is the reason reliance appears on every funder's information request.

Why an addressee matters so much

The duty of care in a consultant's appointment runs to the client named in it. A third party who reads the report and acts on it is, in law, a stranger to that contract. The courts will occasionally find an assumed responsibility to a known third party, but a clearly worded disclaimer in the report and in the appointment makes that argument very difficult.

That is not consultants being difficult. Their professional indemnity insurance is priced on a known set of clients and a known exposure. Every additional party who can sue increases it, which is why reliance is granted deliberately and often for a fee.

How reliance is granted

Four mechanisms, and they are not interchangeable.

A letter of reliance is the lightest. The consultant writes to a named third party confirming that the third party may rely on the identified report as if it had been addressed to it, subject to stated terms. It is quick, it is usually fee bearing, and it can normally be issued in a few days if the firm still exists and its insurance is in place.

A collateral warranty is a deed creating a direct contractual duty between the consultant and the beneficiary. Funders prefer it because it can include step in rights, letting the funder take over the appointment if the borrower defaults. It takes longer to negotiate and the consultant's insurer may have standard form positions on it.

Assignment transfers the existing benefit of the appointment to a new party. Appointments typically permit one or two assignments without consent and require consent beyond that. Assignment moves the rights rather than creating new ones, so it cannot give a funder step in rights.

Third party rights under the Contracts (Rights of Third Parties) Act 1999 achieve much the same effect as a collateral warranty through a schedule to the appointment and a notice. It saves executing separate deeds on a scheme with many beneficiaries and is increasingly used for that reason.

Caps on liability and what they actually mean

Read the numbers, then read the exclusions.

• A liability cap may be expressed per claim or in aggregate, and per report or across the whole appointment. Aggregate caps across several reports are much weaker than they look.
• A net contribution clause limits the consultant to its fair share where others are also responsible, so a claim against one party does not recover the whole loss.
• The professional indemnity requirement states a level of cover and a period for which it must be maintained, commonly running to the end of the limitation period. Cover written on a claims made basis is only as good as the firm's continued renewal.
• Exclusion of indirect and consequential loss usually excludes loss of profit and delay costs, which are often the losses that matter on a development.
• A no greater liability clause means the beneficiary can never be in a better position than the original client, including any cap and any time bar in the original appointment.

A cap set at the level of the fee is common on smaller reports and is close to worthless for a funder. Where the report underpins a foundation design or a flood mitigation scheme, argue for a cap related to the potential loss instead.

Timing the request

At instruction. Always at instruction.

Ask at instruction and reliance is a clause in the appointment, priced into the original fee, with the beneficiaries described generically as any funder, purchaser or tenant. Ask two years later and you are negotiating from a weak position with a firm that has no commercial reason to help, may have merged, may have let its cover lapse for that work, or may simply decline.

Retrospective reliance also fails for a reason nobody anticipates: the individual who signed the report has left, and the firm will not warrant work it cannot review. On old reports, expect a refusal or a re inspection at your cost.

What it costs

There is no published tariff. Practice varies between a nominal administrative charge for a single letter and a percentage of the original fee where a cap has to be raised or cover extended. Collateral warranties cost more because they are negotiated.

The figures to build into an appraisal are the reliance fee itself, your legal cost in reviewing the wording, and the contingency for re commissioning any report where reliance cannot be obtained. On a site being acquired with existing technical information, treat every report without reliance as absent until proved otherwise.

Which reports funders actually ask about

Lenders' information requests concentrate on the reports where the loss would be large and physical: ground investigation and contamination, flood risk and drainage, structural condition, fire strategy, asbestos, measured survey, and increasingly ecology and biodiversity net gain because the gain plan carries a long management obligation.

Planning narrative documents attract less attention, which is rational. A Planning Statement that misreads a policy causes a refusal, not a collapse. The exception is where a report drives a physical design decision or a long term liability.

That distinction matters for AI assisted drafting. A PlanScope draft is a document, not a professional opinion, and no software output can give a funder something to rely on. Reliance attaches to a named professional with insurance who has reviewed and signed the work. PlanScope's review route exists for exactly that step: the draft is prepared quickly, then a suitably qualified reviewer in the professional directory takes responsibility for the content they sign. Budget for that review on any report a funder will ask about, and choose a reviewer whose credentials match the discipline, as the notes on checking a licence holder before you hire set out.

A diligence checklist for a purchaser

Work through this before you commit to a price on a site with existing reports:

1. List every technical report, its date, its author and its addressee.
2. Check whether the author is still trading, and under the same legal entity.
3. Ask for the appointment as well as the report, so you can read the cap, the insurance requirement and the assignment clause.
4. Confirm whether reliance, a warranty or an assignment is available, and at what cost.
5. Check the report's own limitations section for scope exclusions, because reliance on a limited scope report gives you reliance on a limited scope.
6. Test currency. A five year old ecology survey or a flood risk assessment prepared against superseded climate change allowances may need redoing regardless of who can rely on it.
7. Price the gaps, and decide whether to fund the re commissioning or to reflect it in the offer.

Point six is the one that most often decides it. Reliance on out of date information is a right to sue over a document nobody should be using.

For a practice deciding how to structure its own appointments, the choice between a single multidisciplinary instruction and separate specialists changes the reliance position too, as the comparison of multidisciplinary practice and separate specialists explains.

Draft your supporting documents on PlanScope, then send them for professional review so that the signed version is something a funder can be offered reliance on.

PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval. This is general guidance, not legal advice; take advice on the drafting of any reliance letter, warranty or assignment before you sign it.