Road & Sewer Bonds

A Section 38 agreement is intended to ensure the completion and adoption of a new road on a new development. It is a voluntary agreement made between a developer and the local authority. This agreement requires a bond, which is sufficient to ensure the local authority has access to funds to satisfy the developers’ outstanding obligations, should they default on the particulars of the agreement.

Once the road has been constructed to an agreed standard, the new highway is then adopted by the local authority. Adoption of a new highway means that the local authority will maintain the road for the foreseeable future, and at the publics’ expense.

After receipt of Building Regulation approval, the developer should receive a notice under Section 220 of the Highways Act 1980. The assessment is made by the Highway Authority and will either be in the form of charges for individual plots, or a block assessment covering the whole development. The developer should pay the sums assessed, or alternatively enter into a Section 38 Agreement before any work commences on the construction of any building on the development.

In such cases, the bond covering the full estimated construction cost of the roads will be greatly in excess of the amount which would then be required to bring the road up to adoption standards. In such cases, the Highway Authority will, at its discretion, allow a reduction in the bond to a suitable figure which will, in its estimation, cover the cost of the outstanding work.

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

The nature of the types of works a Developer is required to undertake as part of a S278 agreement include:

• 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 improvements works (street lighting, resurfacing works, etc)

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

A Section 184 Agreement Bond is required when a person or organisation wishes to make temporary changes to the highway layout, such as verge, footway and carriageway changes, and whereby the highway layout will be returned to its original layout at the end of the period.

A Section 184 Licence deals with the formation of vehicle crossings over footways and verges, whereby a bond is used to secure any alterations made to an existing access or formation of a new access.

After receipt of Building Regulation approval, the developer should receive a notice under Section 220 of the Highways Act 1980. The assessment is made by the Highway Authority and will either be in the form of charges for individual plots, or a block assessment covering the whole development. An S220 bond therefore requires the Developer to source a surety bond which covers the estimated cost to construct a highway on a development.

An S220 bond reduces the liability on future purchasers if the road is not constructed to the agreed standards or is unfinished for any reason.

This bond is only cancelled when the Local Authority is satisfied a new highway has been constructed to acceptable standards, or a Section 38 Agreement is entered into – in which case the bond is often transferred as the associated.

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

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

A Developers’ inability to comply with the standards agreed in the Scottish Road Agreement bond will allow the Scottish Local Authority to secure a sum of money off the Bondsman (calling in on the bond), necessary to fund the completion or rectification of the road.

In accordance with Section 56 of the Roads (Scotland) Act 1984, it is required that any developer wishing to execute works in the public road (including verge) must apply for a Section 56 permit and obtain Road Technical Approval. This can require a Section 56 Bond, enabling the Local Authority access to funds to satisfy the developers outstanding obligations, should they default on the particulars of the agreement.

Local Authorities have a general power under Section 96 of the Roads (Scotland) Act 1984 to recover maintenance costs arising from damage caused by excessively heavy, or other extraordinary, vehicles or traffic. The type of development where this applies are Wind Farms or major infrastructure projects.

The use of the public road network by significant numbers of heavy goods vehicles and their interaction with other road users can lead to a variety of issues such as spillage, noise, dust and damage to the carriageway. The council can seek these contributions through the provision of a financial guarantee, otherwise known as a Section 96 Bond.

An Agreement under Article 24 of The Order provides for 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.

Where a Private Streets Determination forms part of a planning permission, Article 24 of The Private Streets (NI) Order 1980 (The Order) requires developers to make prior provision for street works expenses. Before commencing any building works, developers should contact Department for Infrastructure (DfI) Roads to put in place the necessary Agreement and Article 24 Bond which enables

The Department of Infrastructure access to funds to satisfy the developers outstanding obligations, should they default on the particulars of the agreement.

The Private Streets (NI) Order 1980 (the Order) and the Private Streets (Amendment) Order 1992 provide the statutory basis for the adoption of roads constructed by Developers.

The Order further provides for the Department (DfI Roads) to adopt the determined layout on satisfactory completion by the developer. Developers are required to enter into an Agreement with the Department so that, on satisfactory completion of the road construction, the roads become public roads.

The Agreement is normally provided under Article 32 of the Order, and can require an Article 32 bond to enable the Department of Infrastructure access to funds to satisfy the developers outstanding obligations, should they default on the particulars of the agreement.

It is the duty of the Water Company to provide a public sewer for domestic purposes if required to do so by the requisitioner. This agreement is detailed under Section 98 of the Water Industry Act 1991.

The Water Company is responsible for the design, construction, and maintenance of the sewers or lateral drains.

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

Under a section 98 agreement, the requisitioner will agree to meet the annual deficits on the sewer for 12 years following the provision of the public sewer, in which a reasonable guarantee in the form of an S98 bond or cash is required. This can be paid in either a 12-year repayment agreement or a commuted lump sum.

Once all the remaining invoices have been paid, the bond can then be cancelled, or cash returned.

Under Section 104 of the Water Industry Act 1991, a developer may enter a voluntary agreement with a sewerage undertaker for the adoption of sewers serving a development. A specific condition of a Section 104 agreement 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 the sewer has been constructed to an agreed standard, the new sewer is then adopted by the Statutory Water Company. Adoption of a new sewer means that the Water Company will maintain the sewer for the foreseeable future, and at the publics’ expense.

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

These agreements are entered into by Developers where it has been identified that a public sewer is compromising the viability of a development project and the Developer wishes to divert or alter the route of an existing adopted public sewer.

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

Any Developer in Northern Ireland proposing to connect a private sewer to a public sewer must require consent by the Statutory Water Company and enter into a Sewer Adoption Agreement (Article 161). These agreements provide a legal vehicle to enable the status and responsibility of the new sewer networks to be transferred from the Developer to the Water Company.

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