A misconception has developed, especially upon lenders, investors and prospective buyers, that a reliance letter means that they can “rely” on the results of an environmental site assessment conducted previously and on behalf of another party. The reliance letter is viewed as a type of insurance or guarantee that that property is not contaminated. Recent changes to the landowner liability protection rules have clarified that reliance letters do not take the place of conducting “all appropriate inquiry” to determine if evidence of contamination and other “recognized environmental conditions” exist. Furthermore, environmental assessments remain valid for only a limited time ( 180 days), regardless of a reliance letter.
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What is a Reliance Letter?
If you were to do a word search for “reliance letter” within the ASTM Standard Practice for Environmental Site Assessments (ASTM E 1527-05) or any of the related federal rules and legislation (such as the Small Business Liability Relief and Brownfields Revitalization Act), you will quickly discover that from both a technical and legal perspective, there is no such thing as a reliance letter relating to landowner liability protections. A reliance letter is simply a contractual agreement between the Environmental Professional and a client providing the client access to professional liability insurance coverage. Lenders and other parties, such as the Small Business Administration, can request reliance letters so they could also have contractual access to the Environmental Professional’s liability insurance.
A reliance letter itself does not provide any assurance that a property is or is not contaminated.
Click here for a Regulatory Briefing on Reliance Letters and AAI
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