Road and Sewer Bonds

A Section 38 Agreement is used between a Developer and a Local Authority to ensure the adoption and completion of a new road on a new development. This Agreement requires a bond to ensure the local authority has access to funds to cover any outstanding obligations if the Developer defaults on the Agreement. 

Once constructed to an agreed-upon standard, the local authority will adopt the new highway and maintain it for the foreseeable future at the public’s expense. 

After receiving Building Regulation approval, the Developer should receive a notice under Section 220 of the Highways Act 1980. The Highway Authority makes the assessment, which will either be charged for individual plots or a block assessment covering the whole development. 

The Developer should pay the sums assessed or enter into a Section 38 Agreement before any work commences on the construction of any building on the development.

Sometimes, the bond covering the full estimated construction cost of the roads will be more than the amount required to bring the road up to adoption standards. However, in such cases, the Highway Authority may reduce the bond to a suitable figure which will, in its estimation, cover the cost of the outstanding work at its discretion.

As part of planning permission, a Developer may be required to enter into a Section 278 Agreement bond, which obliges them to modify or improve the existing highway to account for the impact of a new development.

A Developer might be required to undertake the following work as part of a S278 agreement:

• Construction of new junctions, with and without traffic lights
• Construction of roundabouts
• Construction of cycle lanes or improved footpath network
• Construction of traffic calming measures (speed humps, road narrowing, etc)
• General improvement works (street lighting, resurfacing works, etc)

The Section 278 Agreement bond enables the Local Authority to access funds to satisfy the Developers’ outstanding obligations should they default on the Agreement’s particulars.

A Section 184 Agreement Bond is required when a person or organisation wishes to change the highway layout temporarily. This includes changes to the verge, footway, and carriageway. At the end of the period, the new highway layout will be returned to its original.

A Section 184 Licence secures any alterations made to an existing vehicle crossing or the formation of a new one over footways and verges.

After receipt of Building Regulation approval, the Developer should expect to receive a notice under Section 220 of the Highways Act 1980. The Highway Authority issues this notice and will take the form of charges for individual plots or a block assessment covering the entire development. 

The Highway Authority assesses the cost of constructing a highway on a development, which can be in the form of charges for individual plots or a block assessment covering the entire development. The Developer must obtain a surety bond covering the estimated highway construction cost to get an S220 bond. 

An S220 bond reduces liability for future buyers if the road is unfinished or not constructed to the agreed-upon standards. This bond can only be cancelled if a new highway is constructed that meets the acceptable standards and the local authority is satisfied or if a Section 38 Agreement is signed, in which case the bond is sometimes transferred.

A Scottish Road Agreement bond is a financial guarantee a Bondsman provides to the Adopting Party (Scottish Local Authority) before work can begin on a housing development.

This surety bond guarantees the Scottish Local Authority that the road will be completed to an adoptable standard.

If the developers fail to comply with the standards agreed in the Scottish Road Agreement bond, the Scottish Local Authority can take action by calling in on the bond. This will allow them to obtain the necessary funds from the Bondsman to complete or rectify the road as required.

Under Section 56 of the Roads (Scotland) Act 1984, any developer wishing to execute works on a public road (including the verge) must apply for a Section 56 permit and obtain Road Technical Approval. 

This can require a Section 56 Bond, enabling the Local Authority to access funds to satisfy the Developer’s outstanding obligations should they default on the particulars of the Agreement.

Under Section 96 of the Roads (Scotland) Act 1984, local authorities can recover maintenance costs from damage caused by excessively heavy or other extraordinary vehicles or traffic. This applies to Wind Farms or other major infrastructure project developments. 

Significant numbers of heavy goods vehicles use the public road network, and their interaction with other road users can lead to many issues, such as spillage, noise, dust, and damage to the carriageway. The council can seek these contributions by providing a financial guarantee (Section 96 Bond).

An Article 24 Agreement allows a developer to request that determined streets remain private. Developers should note that streets which have been determined but are to remain private under an Article 24 Agreement must still be designed and properly constructed to the Department’s standards.

If a Private Streets Determination is included in planning permission, developers are required by Article 24 to make provisions for street works expenses beforehand.

Before commencing any building work, Developers should contact the Department for Infrastructure (DFI) Roads to establish an Agreement and Article 24 Bond. This allows the DFI access to funds to satisfy the developers’ outstanding obligations should they default on the particulars of the Agreement.

An Article 32 Agreement Bond provides the statutory basis for adopting roads developed by Developers. 

Developers are required to sign an Agreement with the Department of Infrastructure (DFI) before constructing roads. Upon satisfactory completion of the road construction, the DFI can approve the final layout. Once the roads are deemed satisfactory, they become public roads.

The Agreement is usually provided under Article 32 of the Order and can require an Article 32 bond. This allows the DFI to access funds to cover the outstanding obligations of the developers if they fail to comply with the Agreement terms.

Under Section 98 of the Water Industry Act 1991, the Water Company must provide a public sewer for domestic purposes if requested by the requisitioner. The Water Company is responsible for designing, constructing, and maintaining the sewers or lateral drains.

Requisitioners can be Developers, Owners/Occupiers, or Local Authorities, and these parties are liable for 100% of the total cost of the work.

Under a Section 98 agreement, the requisitioner must agree to cover the annual sewer deficits for 12 years following the provision of the public sewer. 

A reasonable guarantee in the form of an S98 bond or cash is required to ensure that the requisitioner meets this obligation. This can be paid in a 12-year repayment agreement or a commuted lump sum; once the bond is paid, it is cancelled, or the cash returned. 

Under Section 104 of the Water Industry Act 1991, a developer may voluntarily agree to have a sewerage undertaker adopt sewers serving a development. 

A specific condition is that the new sewer development meets Mandatory Build Standards (MBS), which set out the required standards in the design and construction of new sewers and lateral drains.

Once constructed to an agreed-upon standard, the Statutory Water Company adopts the new sewer. Adoption means that the Water Company will maintain the sewer at the public’s expense for the foreseeable future.

The related Section 104 Agreement bond is calculated at 10% of the estimated construction cost of the sewers (33% in Wales).

Section 185 Agreement Bonds are entered into by Developers where a public sewer is identified as compromising the viability of a development project, and the Developer wishes to divert or alter the route of an existing adopted public sewer.

The related Section 185 Agreement bond is calculated at 100-110% of the estimated construction cost to undertake the works. It provides a financial guarantee that the Developer will undertake the works to the Water Companies requirements.

Article 161 provides a legal vehicle for transferring the status and responsibility of the new sewer networks from the Developer to the Water Company.

Any Developer in Northern Ireland proposing to connect a private sewer to a public sewer must require consent from the Statutory Water Company and enter into a Sewer Adoption Agreement (Article 161). 

The related Article 161 agreement bond is calculated at 40% of the estimated construction cost of the sewer.