Reliance letters on a technical report for a funder
A report creates a duty only to the party who commissioned it. How reliance letters, duty of care deeds and collateral warranties extend that to a funder, and what the limits usually are.
A funder asking for a reliance letter on a technical report is asking the consultant to accept that the funder, as well as the client who paid, can sue if the report is wrong. That is the whole point of it. The report itself creates a duty to the person who commissioned it and to nobody else, so without a reliance letter or a duty of care deed a bank lending against a site has no claim against the ecologist, the geotechnical engineer or the contamination consultant whose findings underpin the valuation.
Getting reliance in place is routine. Getting it in place late, after drawdown is conditional on it, is where deals slip. Deal with it at appointment stage and it costs nothing.
Why a funder asks for it
Lenders price land on the assumption that the technical reports are sound. A Phase 2 contamination investigation that missed a hotspot, a geotechnical report that understated the depth to competent ground, or an ecology report that missed a roost all change the cost of development and therefore the security value.
The funder wants a direct remedy rather than a claim routed through the borrower, which would be worthless if the borrower is a single purpose vehicle with no assets. So it asks for reliance.
Three documents do similar jobs and are not interchangeable.
A reliance letter, which is the lightest option: a short letter from the consultant to a named party confirming that party may rely on a named report as if it had commissioned it, usually with the same terms and limits as the original appointment.
A duty of care deed, which is a standalone deed creating a direct duty, often with more detail on insurance, assignment and limitation.
A collateral warranty, which is the construction industry form, typically used for contractors and designers and containing obligations as well as a duty of care.
Where a project has third party rights under the Contracts (Rights of Third Parties) Act 1999 built into the appointment, some of this can be dealt with by schedule rather than by separate deed. Funders vary in what they will accept and some have a standard form they will not move from.
What the limits usually are
Reliance is almost never unlimited. Four restrictions appear in nearly every letter.
| Restriction | What it means in practice |
|---|---|
| Liability cap | A stated maximum, often tied to the fee or to the insurance level |
| Net contribution clause | Liability limited to the consultant's fair share where others also contributed |
| Purpose restriction | Reliance only for the stated transaction and site |
| Limitation period | A shortened period, commonly six or twelve years from the report date |
A liability cap set at a multiple of a modest fee is frequently the sticking point. A contamination report costing a few thousand pounds may carry a cap well below the remediation exposure it is meant to cover, and the funder's surveyor will spot that. The answer is usually to negotiate the cap against the available insurance rather than against the fee.
Net contribution clauses matter more than they look. Without one, a consultant can be pursued for the whole loss and then has to chase others for their share. With one, the funder carries the risk that another party is insolvent. Whether that is reasonable is a legal question and the Unfair Contract Terms Act 1977 can be relevant, so this is a conversation for solicitors rather than for the project manager.
The insurance behind the words
A reliance letter is worth whatever is behind it. Professional indemnity insurance in this market is written on a claims made basis, so the policy that matters is the one in force when the claim is made, not the one in force when the report was written.
Four questions settle whether the reliance has substance.
- What is the current limit of indemnity, and is it each and every claim or in the aggregate for the policy year?
- Is there a pollution or contamination exclusion, which is common and which can gut reliance on a land contamination report?
- Is the limit shared across all claims in the year, so that one large unrelated claim exhausts it?
- How long will cover be maintained, and is run off cover in place if the firm closes?
Ask for a broker's letter confirming the position rather than a copy of the schedule, which often reveals more than the consultant wants disclosed and less than you need. A small practice with a limit of indemnity below the exposure is not a reason to refuse the appointment, but it is a reason to know before you lend.
Registration and competence are separate questions from insurance. A firm can be properly registered and competent and still carry cover that does not reach the risk, which is why what registration with a professional body means is a separate check in its own right.
Reports commissioned by a previous owner
This is the common problem on a site bought with a technical pack already assembled. The reports were commissioned by the seller or by an earlier promoter, the consultant has no relationship with you, and the funder wants reliance.
Four outcomes are possible and they get progressively worse.
The consultant agrees to extend reliance for a fee, sometimes with an updating review. This is the normal and sensible result.
The consultant agrees but requires a review because the report is old and ground conditions or guidance have changed, which costs more but is defensible.
The consultant refuses because the staff who did the work have left, the file is incomplete, or the firm's insurers will not allow reliance to a party it never advised.
The firm no longer exists, in which case there is nothing to rely on at all.
Budget for the third and fourth outcomes. A fresh report on a site where the ground investigation holes have been backfilled and built over is expensive and slow, and a funder will not accept a report nobody stands behind. Where a site has a contaminated land assessment from an earlier owner, test the reliance position before you commit to the acquisition timetable, because reports prepared in accordance with BS 10175 by suitably qualified persons are exactly the documents a lender asks about first.
Assignment and its limits
Assignment transfers the benefit of an existing right to a new party. Appointments commonly allow one or two assignments without consent and then require consent, which is not unreasonable from the consultant's point of view because each assignment extends the pool of potential claimants.
Two traps recur. Assignment of a right to sue does not create a right where none existed, so assigning the benefit of an appointment to a funder gives the funder the client's claim rather than a fresh one with a new limitation clock. And a report that was addressed to a company that has since been dissolved may have nothing left to assign.
For long programmes with several funding events, agree a reliance mechanism at the start: a named number of reliance letters to be provided on request to classes of party, within a stated number of working days, for a stated fee or no fee.
Getting it right at appointment stage
Put the reliance obligation in the appointment rather than negotiating it under pressure later.
Name the classes who may be given reliance: funders, purchasers, tenants and their respective successors. Set the turnaround, something like ten working days from written request. Fix the fee, or state that no additional fee is payable. Require the limit of indemnity to be maintained for a stated period and require notice if cover lapses. And attach the agreed form of reliance letter as a schedule, so there is no negotiation when the request comes.
Consultants generally accept this when it is raised at appointment and resist it when it is raised at drawdown, for the obvious reason that the bargaining position has moved. A geotechnical assessment or a structural report costs almost nothing to get reliance on in advance and is painful to fix afterwards.
PlanScope can draft the structure and content of a technical report for review, with flags where site facts are missing, but reliance, insurance and liability are matters for the author of the final report and for your solicitor. The professional directory is the route to a reviewer who can take ownership of a draft and sign it off.
This is general guidance, not legal advice; take advice from a solicitor on any reliance letter, duty of care deed or collateral warranty 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. For specialist technical reports, qualified professional input may be required.
Frequently asked questions
What is the difference between a reliance letter and a duty of care deed?
A reliance letter is a short letter confirming a named party may rely on a named report, usually on the same terms as the original appointment. A duty of care deed is a standalone deed creating the duty, with fuller provisions on insurance, assignment and limitation. Funders differ in which they will accept, and some insist on their own form.
Can I rely on a report commissioned by the previous landowner?
Not without the consultant's agreement. The duty runs to the party who commissioned the work. Most consultants will extend reliance for a fee, sometimes requiring an updating review. Some refuse where staff have left, the file is incomplete or insurers object, and a dissolved firm leaves nothing to rely on at all.
Why does a liability cap matter so much on a contamination report?
Because the fee for the investigation bears no relation to the remediation exposure it describes. A cap tied to a few thousand pounds of fees gives a lender almost nothing if the report missed a hotspot. Negotiate the cap against the available professional indemnity limit rather than against the fee.
What should I check about the consultant's insurance?
The current limit of indemnity and whether it applies to each claim or in the aggregate for the year, whether a pollution or contamination exclusion applies, how long cover will be maintained, and whether run off cover exists if the firm closes. A broker's letter confirming the position is the practical evidence to ask for.
Does assigning an appointment give a funder a fresh claim?
No. Assignment transfers the existing right, so the assignee takes the claim the original client had, with the same limitation position and the same caps. It does not create a new duty with a new limitation clock. Appointments typically allow one or two assignments before consent is required.
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.