• It always surprises me how many property purchasers end up not getting a Letter of Reliance from the environmental consultant, when the Environmental Site Assessment report was conducted for another party, such as the property owner seeking to sell their property. I have lost track of how many ESA reports I have completed for property owners/vendors who never ask for a reliance letter for the buyer – despite me asking several times if such a letter is needed. For those readers not familiar with environmental due diligence, you may wonder what a reliance letter is, and why it’s important for a property transaction. As I discussed in my last blog, most ESA reports will include a Statement of Limitations (SOL), that restricts unauthorized third-party use, among other things. The SOL essentially outlines what is and isn’t included in the ESA report, restricts consultant responsibilities to the original client, and limits potential liability associated with unauthorized third party use of the report.

    The reliance letter is a legal document which extends the privity of contract to the named third party or parties, such as a property purchaser and often their financial institution. Without such permission to rely on the report, the third parties may still use the report but strictly at their own risk. Before issuing a reliance letter, the consultant must carefully consider a number of factors, including but not necessarily limited to the following:

    • Who is the third party requesting reliance?
    • What are the purpose and objectives of the third parties in requesting reliance (e.g. due diligence, purchase, financing, redevelopment)?
    • Is the original report suitable for the third party’s intended use (e.g. the original report was CSA compliant for due diligence but the 3rd party purchaser requires an RSC compliant report for a change in land use)?
    • How long ago was the report conducted and are the findings still valid for the new party?

    The consultant must fully understand who is involved, their requirements, and ultimately that they are comfortable in extending a legal duty of care to the new parties. Unless there are compelling reasons to refuse, failure to provide a requested reliance letter can be bad for the consultants reputation and consequently bad for business. In some cases refusal can be justified, such as the original report is out of date or unsuitable for the third party’s intended use. The consultant must also be aware of unreasonable wording in a requested reliance letter. I have seen some banks demand the consultant extend unlimited reliance to any 3rd parties the bank provides the report to, for an unlimited period of time – this can be more dependence than was provided to the original client. Personally, my reliance letters state the third party may rely on the report to the same extent as my original client, and subject to the same limitations and restrictions.

    For stakeholders, there are some potential red flags to watch for when a consultant refuses to provide a reliance letter. Apart from more reasonable concerns noted above, some refusals may be related to a change in consultant ownership as part of a sale or merger; the consultant realizes they made errors in the original report and no longer stand behind their findings – or now require additional site work; or conditions at the site or surrounding properties have changed significantly and the findings of their original report are no longer valid. Any of these situations may require further discussion and clarification between the involved parties, and in some cases may need a new, updated report – and/or a new consultant.

    Bill Leedham, P. Geo., CESA
    Bill is the Head Instructor and Course Developer for the Associated Environmental Site Assessors of Canada (    www.aesac.ca); and the founder and President of Down 2 Earth Environmental Services Inc. You can contact Bill at info@down2earthenvironmental.ca