Why won't my bank accept the valuation I already have?

Usually because the report was prepared for someone else and the bank has no right to rely on it. If the figure proved negligent, the bank could have no claim against the valuer. The bank may accept it with a reliance letter from the valuer, if the valuer is on its panel and the report is recent and on a suitable basis. Otherwise it orders its own valuation, addressed to itself, which is often a condition of the loan.

Who pays for a valuation reliance letter?

Normally the borrower, as with most costs of putting security in place. The valuer may charge a fee for the letter because it is taking on liability to a second party, and will usually want the original client's consent before it agrees. The fee is usually smaller than the cost of a new valuation, but the valuer is free to decline, for example if the report is old or the market has moved.

Does a reliance letter update the valuation date?

No. The letter gives a new party the right to rely on the existing report, at its original valuation date and on its original assumptions. If the market or the property has changed since then, the letter does not reflect it. A bank that needs a current figure asks for a fresh valuation or an update, and a valuer asked for reliance on an old report will usually say in writing that it has not revalued the property.

Can a bank sue a valuer it did not instruct?

Only if the valuer owed it a duty of care, which a court will not readily find where the valuer was writing for someone else and did not know the bank would rely on the figure. A reliance letter removes that doubt by accepting the bank as a party entitled to rely, on the original terms. The bank still has to prove negligence and loss, and any liability cap in the terms applies to its claim.

// WORKED EXAMPLEWHAT THE DOCUMENT DOES

Valuation Reliance Letter: Why the Bank Needs One

A copy of the report is information. The letter makes it a promise.

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-07

// THE SHORT ANSWER

A valuation reliance letter is what a lender asks for when the valuation it wants to lend on was ordered by someone else. A copy of the report tells the bank what the valuer thought; the letter gives the bank standing to hold the valuer to it if the figure was negligent. It names the bank, states the purpose it may rely on the report for, and binds the bank to the valuer's original terms, including any cap on liability. It does not refresh the valuation: the effective date stays where it was, and so do the assumptions the valuer made for the original client.

BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// MAKE THE CALL

Issue 03 — Kauri Dairy Holdings. The patriarch is retiring. The bank hears about the succession plan from the accountant first. Your call first, then the senior banker's.

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// 01 — WHY A COPY OF THE REPORT IS NOT ENOUGH

A valuer's contract is with whoever instructed it. If the report is negligent, that client can sue for breach of contract. Anyone else must show the valuer owed them a duty of care in negligence, and a valuer who wrote for a borrower, an accountant or another lender did not, as a rule, undertake responsibility to a bank it did not know of. A bank that lends on a borrowed report may therefore find, at the moment the security falls short, that it has no claim against anyone for the figure it relied on.

Valuers, for their part, guard against that exposure. The UK professional body's practice information tells its firms to state that a report may be relied on only by the named client, to treat any wider reliance as a decision taken knowingly, and, where they do permit it, to bind the third party to the original terms and liability cap. Reports in New Zealand and Australia commonly carry similar limits on who may rely on them. The reliance letter is the formal exception: the valuer agreeing, in writing, that one named party may rely on one report for one purpose.

// 02 — WHAT THE LETTER SAYS

The working parts recur. It names the relying party, and where a loan is syndicated, the agent, the security trustee and the lenders of record, while often excluding later buyers of the loan. It states the purpose, typically secured lending on a named facility, so the bank cannot later stretch the report to cover a different decision. It confirms that the valuer has not re-inspected the property and that the valuation date is unchanged. It binds the bank to the original terms of engagement, and states that any liability cap is shared in aggregate between the original client and everyone permitted to rely. And it usually carries a fee, because the valuer is taking on a second client's claim.

In Australia, many valuers also belong to a professional standards scheme, approved under state and territory legislation. For a member holding the insurance the scheme requires, it caps liability in damages for each cause of action, under the valuers' scheme at a ceiling that rises with the value assessed. The ceiling applies whoever sues, so a reliance letter does not lift a bank's claim above it; a higher ceiling is for the scheme to grant, on the valuer's application. A lower cap in the valuer's terms binds the bank as well.

// 03 — THE EXAMPLE

An engineering company, constructed for this page like every figure in it, is refinancing to a new bank. It holds a valuation of its factory at US$5.0m, five months old, prepared for its outgoing lender. The new bank offers US$3.25m, 65% of that figure, on condition that it receives either a valuation addressed to itself or a reliance letter. The valuer, who is on the new bank's panel, issues a letter: reliance by the new bank for this facility only, the original terms and a US$1.0m aggregate liability cap, no re-inspection. The bank's credit policy, for a report of that age, adds a desktop valuation update, which confirms the figure. These levels are the example's, not a market norm.

Two years later the company fails. The receiver's sale brings out that the report overstated the factory's floor area by a fifth, an error a careful valuer would not have made.

Valuation relied on 5.00

Careful valuation at the same date 4.00 ← overvalued by 1.00

Debt at default, with costs 3.40

Sale proceeds − 3.00

Shortfall to the bank 0.40

With the letter, the bank has a claim: it must prove negligence and its loss, the court may reduce the award for the bank's own part in the lending decision, and recovery stops at the US$1.0m cap, shared with any claim the outgoing lender makes. Without the letter, the same facts may give it nothing to claim. The desktop update does not change that: it was a check, not a fresh valuation, and its own terms will say how far it can be relied on.

// 04 — HOW IT DIFFERS FROM A BANK-INSTRUCTED VALUATION

The nearest alternative is a valuation the bank orders itself from a panel valuer, addressed to the bank from the start. The bank sets the instructions, chooses the basis of value, and is the client, with a contract claim if the work is negligent. Many lenders prefer it for a material loan because a borrower-instructed report can be shaped by what the borrower asked for and what it told the valuer. A reliance letter is the cheaper and faster route, and is accepted when the report is recent, from an approved valuer, and on a basis the bank would have chosen.

Two other documents are often confused with it. A non-reliance letter lets a party see a report while expressly giving it no right to rely on it. And an assignment transfers the original client's rights under the contract to a new party, usually when a loan is sold; it is a different legal route to the same report, and many valuers' terms forbid it without consent.

DEFINED IN ONE PARAGRAPH → · THE PANEL VALUER → · LOAN TO VALUE RATIO →

// 05 — WHERE IT DECIDES A FILE

It sits in the conditions precedent, and the loan cannot be drawn until it arrives in a form the bank accepts. The lending officer checks four things before it is ticked: that the named relying party is the entity actually lending, and in a syndicate every lender who needs it; that the purpose covers this facility and not only the original client's; that the valuation date is recent enough for the bank's policy; and that the cap is a sum the bank can live with, given the loan.

The letter matters again if the security falls short. A recovery from the valuer is one of the few sources of money left once a property has sold below the debt, and whether the bank can pursue it was settled the day the condition was ticked. A file that says only 'valuation sighted' has, in effect, left it out.

CONDITIONS PRECEDENT → · WHAT YOUR BANK HOLDS AS SECURITY → · THE QUESTION ON IT →

// SOURCES

The documents the statements on this page rest on. Each was opened and checked when cited.

Royal Institution of Chartered Surveyors, Risk, liability and insurance, RICS practice information, UK, 1st edition (April 2021, updated October 2023) — section 4, Appendix A3 and Appendix C7 — Valuers should limit reliance to the named client by default, and where they permit third-party reliance should bind the third party to the original terms and aggregate liability cap, confirm the effective date is unchanged, and use a reliance or non-reliance letter — sections 01, 02 and 04.
Professional Standards Councils, Australian Property Institute Valuers Limited Professional Standards Scheme (Professional Standards Act 2003 (Vic), commencing 1 September 2026) — clauses 4.1–4.3 and 5.1 — A participating member with compliant insurance is not liable in damages above a monetary ceiling for each cause of action, scaled to the value assessed, and the scheme may set a higher ceiling for a member on application — clauses 4 and 5; section 02.

// QUESTIONS PEOPLE ASK

Why won't my bank accept the valuation I already have?: Usually because the report was prepared for someone else and the bank has no right to rely on it. If the figure proved negligent, the bank could have no claim against the valuer. The bank may accept it with a reliance letter from the valuer, if the valuer is on its panel and the report is recent and on a suitable basis. Otherwise it orders its own valuation, addressed to itself, which is often a condition of the loan.
Who pays for a valuation reliance letter?: Normally the borrower, as with most costs of putting security in place. The valuer may charge a fee for the letter because it is taking on liability to a second party, and will usually want the original client's consent before it agrees. The fee is usually smaller than the cost of a new valuation, but the valuer is free to decline, for example if the report is old or the market has moved.
Does a reliance letter update the valuation date?: No. The letter gives a new party the right to rely on the existing report, at its original valuation date and on its original assumptions. If the market or the property has changed since then, the letter does not reflect it. A bank that needs a current figure asks for a fresh valuation or an update, and a valuer asked for reliance on an old report will usually say in writing that it has not revalued the property.
Can a bank sue a valuer it did not instruct?: Only if the valuer owed it a duty of care, which a court will not readily find where the valuer was writing for someone else and did not know the bank would rely on the figure. A reliance letter removes that doubt by accepting the bank as a party entitled to rely, on the original terms. The bank still has to prove negligence and loss, and any liability cap in the terms applies to its claim.

THE IN-TRAY · ONE MINUTE

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A short file on the ground this page covers. Every option opens with how far it sits from a senior banker’s read.

THE CALL · THE LOAN · PROTECTION

A company with a US$25m senior secured bank loan and US$20m of unsecured notes fails. After the costs of the process, its assets realise US$30m.

Who gets what?

7 MORE ON THE LOAN · PROTECTION →WHERE DO YOU READ FROM? THE PLACEMENT →

THE GLOSSARYIN ONE PARAGRAPHValuation reliance letter What is a valuation reliance letter, and why does the bank need one?