Environmental consultants do a booming business charging for reliance letters, when someone other than their original customer wants to be able to rely on a report about a potentially contaminated site. Typical customers for reliance letters include purchasers of property, and lenders. Unfortunately, both buyers and lenders may delude themselves that a reliance letter is some sort of guarantee as to the environmental quality of a property. This is particularly the case with engineer’s reliance letters for a Phase I ESA.
Obvious items to ask for in the wording of reliance letters include:
1. making sure that the correct parties are listed,
2. showing the purpose for which each party intends to use the report, i.e., a buyer’s intention to rely upon the report in the purchase of the property, and
3. clarifying what happens if the listed parties change their names, reorganize, transfer their interests, etc..
But even if the engineer agrees to put all this in the letter, the reliance letter doesn’t put the buyer in a better position than the original customer for the report. In fact, that’s the precise reason that environmental consultants insist on the reliance letter approach. As mentioned last week, many of the major consulting firms make these terms and conditions extremely one-sided. In addition, many engineers insist that a Phase I ESA is not part of “engineering”, and therefore that PEO’s competence regulation doesn’t apply to Phase I work. As a result of these and other problems, the reliance letter may give the holder no practical remedy if the engineer’s report turns out to be negligent.