There is a particular issue with third parties being provided a copy of our advice; regardless of whether they are expressly allowed to rely on it or expressly prevented from relying on it. The issue is that this gives the third party rights against the firm to sue us for negligence, but these are not subject to the protections in our Terms of Engagement, for example the provisions limiting our liability. Our standard position is that we address our advice only to our client and our Terms of Engagement, forbid any client from sharing our advice with any third party.
If a third party needs to see our advice, then our preference is that we onboard that third party as a client and we deliver bespoke advice to it, or a copy of our previous advice, with a suitable caveat to explain it was prepared for another client and not for this new client and a reference to when it was prepared (or of course it can be redone, bespoked and updated if that's agreeable). Usually. we would charge a further fee for doing so, to cover the additional service of allowing that new client to rely on our advice and sue us if it is wrong. That is a new risk and was not paid for by the earlier client; thus, further charges are reasonable. In some cases (e.g. when addressing the advice to a lender), the risk is very different; banks frequently sue law firms and for them they will simply look at loss, which could be nothing more than a swing in the value of the security, and they have teams continually recouping that loss from law firms. There is therefore a good argument that addressing our advice to a lender would yield a significant extra fee.
Some law firms do agree to allow third parties (e.g. a lending bank) to rely on their advice, subject to a non-reliance letter. This is not a good solution. Non-reliance letters must be reasonable and the courts, the SRA and the Legal Ombudsman could overrule the terms with the result that the third party is permitted to rely on our advice. Indeed, a non-reliance letter can be counterproductive. By issuing such a letter, it is clear that we have agreed to allow a third party to see our advice. Our position is best protected by our saying we never agreed to allow a third party to see any of our advice, nor were we aware that any third party was able to view our advice. That position is defensible and it would be hard for a third party to show it was entitled to rely therefore on our advice to another client.
In practice, clients probably do share our advice with third-parties, but where we have nothing to do with that, then we have no duty of care. That is a solid position and arguably preferable to agreeing third-party reliance.
For completeness, we would typically never agree to third-party reliance on our legal opinion. These are insurance policies and almost all the value is in the liability, third-party reliance there, even sight of it, is tantamount to the entire benefit of the work all over again and a full fee should attach to that, calculated by reference to the likelihood of a possible claim under that opinion. The best approach is the client says to the third-party that it took a legal opinion from a reputable firm, and leave it at that.
Finally, reports on title are commonly also addressed to the client's lender and this is accepted. Doing so must have been in contemplation when the work was priced, if not a further fee would be due. To achieve acceptable third-party reliance, it is best to add wording into the report along the lines of that used by the City of London Law Society, see https://clls.org/resources/precedentdocuments.html. You should also sign up to a reliance letter with the lender and charge them, or more likely, the client, a fee for assuming this extra risk. Resist downward pressure on fees. Third party reliance should be expensive and should NEVER be charged on a time basis. This is an insurance policy for the lender. Try to limit our liability to £3,000,00 and try only to have one party that can rely on it. If you allow assignments of our Report, then increase your fee. Beware multiple parties getting access and note that our SRA minimum liability cap is £3m per client/third party, so claims are NOT aggregated. Please see our template Reliance Letter. All reliance letters need to be signed off by the General Counsel or the Director of Operation and Compliance in writing before any report is issued to a third party, even if in draft or subject to a latter of non-reliance.