Reliance Letters: Who Else Is Standing Behind Your Report?

Most of us spend a lot of time thinking about the contract we sign at the start of a project, and if not, we should be. But something that doesn’t always get the same level of attention is a fairly routine, but overlooked document that crosses a project manager’s desk at the end of a project: the reliance letter.

If you’ve been in the geoprofessions for any length of time, you’ve likely seen one. The report is done, your invoice is out, and everyone is hopefully feeling pretty good about the way the project ended. Then an email arrives: “Our lender needs a reliance letter. Can you sign this by Friday? It’s just a formality.”

Just a formality…those might be some of the most expensive words in our business.

What a Reliance Letter Actually Does

At its core, a reliance letter allows parties who did not commission your report, such as lenders, investors, buyers, or successors, to rely on it as if it had been addressed directly to them. They show up most often with Phase I Environmental Site Assessments (ESAs) tied to property transactions and financing, but they can just as easily appear on a geotechnical report for a development that is changing hands or being refinanced.

But, here’s what you need to think about…when you signed your agreement with your client, you negotiated a scope, a fee, a limitation of liability, and a set of terms that made sense for that relationship. All of that is what went into the contract review, risk assessment, and agreement. A reliance letter invites new people into that relationship, many times people you have never met, and all after the work is finished and the fee is already set (or often spent). Every added relying party is a potential future claimant and increases your risk exposure. And the terms of the letter, not your original contract, may define your exposure for years after the report is issued.

In other words, a reliance letter is a contract. It deserves the same careful evaluation, risk assessment, and negotiation as any other agreement you sign. Maybe even more, because it tends to show up at the very end of a project, under the pressure of some type of deadline, when everyone just wants to be done with the project.

A Real Story

We recently worked through a reliance letter negotiation that is a great example of how this can play out in real life. Our scope was an update to a prior Phase I ESA. Pretty straightforward. The catch was that the client needed a reliance letter so its lenders and investors could rely on our report ahead of the financing escrow period deadline.

The client sent over its standard template for us to redline. We delivered the completed report and our first round of redlines on the same day. Within 24 hours, the client’s legal team responded, questioned each change, and asked us to justify our position. Over the next couple of weeks, emails kept being exchanged, the closing date kept getting closer and rather than meeting in the middle, the other side returned additional redlines. At one point, our internal summary was that the other side wasn’t compromising and kept adding new items.

From the initial request to the final resolution, the whole process took about seven weeks. Here are the issues that mattered most, and why.

Issue #1 – Who Gets to Rely on the Report?

The client’s draft allowed any successor or assignee of the client, its affiliates, or any listed lender or investor to rely on our report indefinitely, with no requirement that the reliance be tied to an actual transaction. Let’s think about that for a second. Anyone who eventually ended up connected to that project, at any point in the future, for any reason, could step into the shoes of our client. That’s a pretty broad inclusion, from most people’s perspective.

We weren’t opposed to successor reliance altogether. That’s a completely reasonable request in a financing deal. But it needed boundaries and some sort of reasonable limit. What was acceptable was to limit the final, signed letter to successor and assign reliance to parties connected with a specific financing, assignment, transfer, purchase, sale, or similar transaction involving the project.

So, what do you do? Watch for open-ended phrases like “successors and assigns,” “affiliates,” “any party”, or “indefinitely” without limits. Reliance should always be linked to named parties and a defined transaction, not an ever-growing list of unknown entities.

Issue #2 – Has Anyone Changed the Report?

The client’s draft included a disclaimer for modified copies of the report, which is good. But it never formally stated whether the report, as referenced, had been modified. That might seem like a small detail, but there is a real difference between saying “we’re not responsible for altered versions” and confirming “here is the report, and it has not been altered.”

Our negotiations added language confirming that the reports had not been modified, edited, or altered since issuance. A disclaimer by itself is good, but a disclaimer paired with an affirmative statement of fact is better. It establishes exactly which document is being relied upon and makes it much harder for anyone to point to a different version at any point in the future.

Issue #3 – Standard of Care, As of When?

This one was, to put it politely, hard to follow. The client’s language left it unclear whether our standard of care applied only as of the report date or continued indefinitely into the future. Vague language like this can be read as an open-ended promise to keep monitoring site conditions forever. The issue here is that Phase 1 ESA’s aren’t allowed to last that long with an update, and you can bet that we didn’t price our Phase I fee to include “forever.”

For pretty much all our geoprofessional services, our reports are snapshots in time. Subsurface and site conditions change, regulations change, and properties change. The final letter tied our opinions strictly to the information available and the standard of care as of the date the reports were issued, with no ongoing obligation to update them. If a relying party needs current information, the right approach would be to obtain an updated assessment, not endlessly warrant on an old one.

A Couple of Smaller Wins Worth Noting

Not every important term shows up as a primary focus. We negotiated language confirming that relying parties are third-party beneficiaries only, meaning they have no direct contractual right to enforce the underlying agreement against us. We also held our ground on governing law, where the client’s language originally pushed to move governing law away from the state where the project is located and where the work was performed to the state where the client’s stakeholders were based. We held firm, and the final letter remained governed by the laws of the state where the project exists and the work was conducted. As is the case with any contract negotiation, the location that a dispute gets decided and under which state’s rules matters a great deal more than it might seem at first glance.

The Turning Point: One Phone Call

Here is the best part of the story. After roughly five weeks of redline-by-redline email exchanges, both sides agreed that email wasn’t working. So, we picked up the phone and talked directly with the client’s legal counsel. That one phone call helped both sides agree and exchange clean and redlined drafts reflecting a shared framework for the remaining issues, all within a day.

Five weeks of email. One phone call. Email is great for documenting agreements, but it’s not normally the best tool for reaching them. Tone gets lost, positions harden, and every redline starts to feel like a personal challenge. A personal conversation lets each side explain the why behind its position, and that’s usually where the path forward presents itself.

The Final Trade

Negotiation is not about winning every point; it’s about knowing which points truly matter. In the last week, the lenders conditionally accepted our draft, subject to one more change: raising the liability cap. We agreed the same day to a reasonable increase and finalized the letter.

Why were we comfortable with that compromise? Because the concession was something the client and its lenders genuinely valued, and it was acceptable to us. The cap remained tied to fees paid and applied collectively across all relying parties combined, not per party. And in exchange, the lenders accepted our language on reliance scope, report modification, standard of care, and governing law. Those were our must-haves. The dollar figure was a reasonable give. We traded something measurable and limited for protections against exposure that would otherwise have no ceiling at all.

A Quick Word on Fees

One more point that is easy to overlook…reliance letters should come with an associated fee. Reviewing and negotiating the letter takes real time, and extending reliance to lenders, investors, or buyers adds real value for our client. It helps them close their deal. That is a service, and like any other service we provide, it should be priced accordingly. Building a reliance fee into your proposal, or quoting one as soon as the request arrives, sets the right expectation from the start.

Lessons for the Next One

1. Redline the letter or agreement early and be specific. Cite the exact paragraph and the business reason for each change because vague objections invite pushback and clear explanations promote agreement.
2. Know your must-haves versus your give-ins before the negotiation starts. If you decide what you can trade away in the middle of a deadline crunch, you’re more likely to trade away the something you really didn’t mean or want to.
3. Escalate the conversation before the deadline, not after. If a negotiation stalls, flag it internally with enough runway for leadership to weigh in. A closing date is the client’s deadline and shouldn’t become a reason for you to accept risk you otherwise wouldn’t.
4. Pick up the phone. A conversation can resolve what weeks of email can’t.

The Bottom Line

Reliance letters are a normal and legitimate part of project financing and property transactions. Lenders and investors need to rely on our work, and helping our clients close deals is part of being a good business partner. The goal isn’t to refuse or make the process painful. It’s to make sure the people relying on our report are relying on it for the right reasons, within the right limits, and under terms that reflect the work we actually performed.

So, the next time someone tells you a reliance letter is “just a formality,” smile, say you’d be happy to help, and then read it like the contract it is. You’ll be glad you did!