Reliance letters and duty of care deeds for lenders
A consultant's report is owed to its addressee alone. Here is how reliance letters, duty of care deeds and assignment work, what caps funders accept, and which reports cannot carry reliance at all.
A lender cannot rely on a consultant's report addressed to someone else, which is why a reliance letter for a consultant report is one of the first things a funder's solicitor asks for. The report is a contractual deliverable owed to the party who appointed the consultant. Everyone else is a stranger to that contract, and most reports carry a disclaimer saying exactly that in the opening pages.
Development finance stalls on this more often than on the planning position. The reports exist, the site is consented, and nobody thought about who would be entitled to sue if the ground conditions turn out to be wrong.
Why the addressee matters
Two routes exist for a third party to recover from a consultant, and both are narrow.
The first is contract. Only the parties to the appointment can sue on it, unless the appointment confers a right on a named third party under the Contracts (Rights of Third Parties) Act 1999. Most professional appointments expressly exclude that Act, so the default position is no rights at all.
The second is tort, through negligent misstatement. English law requires something close to an assumption of responsibility towards the particular claimant, which is why reports are drafted with disclaimers stating that no responsibility is accepted to any party other than the addressee. A well-drafted disclaimer is usually effective, and a lender's solicitor will read it before reading the technical findings.
So the lender's position is not improved by being handed a copy of the report, or by being copied into the covering email. Possession is not reliance.
Reliance letters, duty of care deeds and warranties
Three instruments do the same job with different levels of formality, and the choice is usually driven by the lender's own template rather than by what the consultant would prefer.
| Instrument | Form | What it typically contains |
|---|---|---|
| Reliance letter | Letter, signed by the consultant | A statement that the named party may rely on the identified report as if addressed to it, usually subject to the original appointment's limitations |
| Duty of care deed | Deed | Express duty of reasonable skill and care, liability cap, net contribution, covenant to maintain professional indemnity cover, assignment provisions |
| Collateral warranty | Deed | As above plus step-in rights, copyright licence and, on construction appointments, obligations around materials and workmanship |
The practical difference between a letter and a deed is limitation. An action on a simple contract must be brought within six years under section 5 of the Limitation Act 1980, while an action on a deed has twelve years under section 8. Lenders on long-dated facilities push for a deed for that reason alone.
Assignment is the fourth route, and the least costly where it is available. Appointments commonly permit one or two assignments of the benefit without the consultant's consent. If a funder will accept an assignment rather than a fresh deed, take it, because it needs no negotiation.
Liability caps and what funders accept
Every consultant will cap liability, and the cap is the part of the negotiation that takes the longest.
Caps are usually expressed as a fixed sum or as a multiple of the fee. A survey costing a few thousand pounds may carry a cap in the low hundreds of thousands, which a lender funding a scheme of several million will question. The honest answer is that the consultant's professional indemnity policy sets the ceiling, and a cap above the policy limit protects nobody.
Net contribution clauses are the second sticking point. They limit the consultant's liability to the share that would be just and equitable having regard to the responsibility of other parties, which transfers insolvency risk back to the lender. Some funders strike them out as a matter of policy, and the consultant then has to decide whether the fee justifies the exposure.
Check the policy before negotiating the cap rather than afterwards. What to look for in cover, including run-off provisions and aggregate limits, is set out in more detail in our note on professional indemnity cover.
Reports that cannot be relied on, and why
Not every document in the data room can carry reliance, and discovering that late is expensive.
- Reports prepared for a different purpose. A preliminary ecological appraisal written to support a planning application is not a biodiversity gain plan, and a consultant will not extend reliance for a use the scope never covered.
- Desk studies with no intrusive investigation. A contaminated land phase 1 report is a screening document, and most authors will only offer reliance on its conclusions as a desk exercise, not on ground conditions.
- Reports whose author has ceased trading or let cover lapse. A reliance letter from a firm with no insurance is a piece of paper.
- Drafts, including AI-assisted drafts. A draft becomes a professional deliverable when a named, suitably qualified author takes responsibility for it, and only then can reliance follow.
- Reports where the client supplied the input data and the consultant disclaimed verification. The disclaimer survives the reliance letter unless it is expressly disapplied.
Where the report type carries a legal competence requirement, the signatory matters as much as the firm. A geotechnical design report needs the right signatory under Eurocode 7, which we cover in who signs a geotechnical design report, and contaminated land work needs an author whose status you have actually checked, as set out in choosing a contaminated land specialist.
Timing the request
Ask for reliance in the appointment, before the report is written. Three things follow from asking early.
- The consultant scopes the work knowing a funder will read it, which changes the depth of the investigation and the caveats.
- The fee includes reliance rather than attracting a separate charge later.
- The consultant's insurer is on notice from the start, which avoids the awkward position where cover was placed on the basis of a single client.
Requesting reliance eighteen months after issue is the worst case. The author may have left, the firm may have changed its position on net contribution, and the report may sit outside the shelf life the lender's panel requires for that discipline. Consultants are entitled to refuse, and some do.
Cost, and who pays
Reliance is normally priced as a fixed sum per addressee or as a percentage of the original fee, agreed case by case. There is no published scale, and the number reflects the exposure rather than the effort.
The requesting party usually pays, but on a funded scheme the borrower almost always bears it through the facility's cost schedule. Budget for several addressees, because a senior lender, a mezzanine funder, a purchaser and a tenant may each want their own instrument, and each one is a separate negotiation.
One honest uncertainty: there is no market standard on how many addressees a consultant will accept before pricing changes materially. Firms differ, and a cap on the number of reliance parties is a term worth negotiating in the original appointment rather than discovering later.
Keeping the chain intact on a sale
On an asset sale the buyer inherits nothing automatically. Reliance letters addressed to the seller do not travel, and a duty of care deed will only assist a buyer if it permits assignment or names successors in title.
Build the pack while the project is live. For each technical report, record the author, the signatory and their qualification, the date, the scope and purpose, the existing addressees, the assignment provisions, the liability cap and the insurance position. That schedule is what a buyer's solicitor will ask for, and compiling it from scratch two years later is slow and incomplete.
Where a draft needs a named professional's signature before a funder will look at it, PlanScope's professional directory is the route to a reviewer who can review and sign off a report. For specialist technical reports, qualified professional input may be required, and for some report types a licensed or competent professional is legally required rather than merely advisable, so the draft is a starting point for that professional and not a substitute for them.
This is general guidance, not legal advice; check the position with your solicitor or a qualified professional before relying on it. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval.
Frequently asked questions
What is a reliance letter?
A letter from a consultant confirming that a named third party may rely on an identified report as if it had been addressed to them, usually subject to the limitations in the original appointment. It is the lightest of the three common instruments and is often enough where the exposure is modest and the facility is short.
Why will my lender not accept the report I already have?
Because the consultant owes a duty to its client, not to the lender. Most reports carry a disclaimer rejecting responsibility to anyone other than the addressee, and professional appointments usually exclude the Contracts (Rights of Third Parties) Act 1999. Without a reliance letter, deed or assignment, the lender has no claim if the report is wrong.
Is a deed better than a letter?
For limitation purposes, yes. An action on a simple contract must be brought within six years under section 5 of the Limitation Act 1980, while an action on a deed has twelve years under section 8. Lenders on longer facilities usually insist on a deed for that reason, and will also want insurance covenants in it.
Can a planning report be relied on for funding?
Only within the scope it was written for. An ecological appraisal prepared to support an application is not a biodiversity gain plan, and a phase 1 desk study is a screening exercise rather than a statement about ground conditions. Consultants will restrict reliance to the stated purpose, and lenders' panels often set their own shelf life.
Who pays for reliance?
The requesting party in form, the borrower in substance, since reliance costs usually appear in the facility cost schedule. Pricing is a fixed sum per addressee or a percentage of the original fee, with no published scale. Budget for several addressees where senior and mezzanine funders, a purchaser and a tenant all want their own instrument.
Sources and further reading
This article is general guidance about the planning system in England and, where stated, the rest of the UK. It is not legal or professional advice. Check your local planning authority’s validation requirements and take professional advice for your specific site.