What Is A Road And Sewer Bond? & What Will It Cost?
Road and Sewer Bonds are a contractual requirement when a developer wishes to transfer responsibility of a road or sewer to the council or a water company. However, a lot of new developers may be unaware of what bond they require and why exactly they need them.
In this article, we will be focusing on a very specialist area of the surety industry, Road and Sewer Bonds. We will look at what exactly they are, why they are needed, how much they cost, and how much money. This will help you to better understand Road and Sewer Bonds and streamline your overall development processes.
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What Are Road & Sewer Bonds?
Road and sewer bonds fall into a very specialist area of the surety market. The bonds are put in place to provide a financial guarantee from an underwriter to local authorities and water companies. This falls within a developer’s obligations when aiming to achieve the adoption of a site’s highway or sewer.
To put it simply, it is an agreement between both the developer and the government to ensure that all parties are happy and are covered. This is because these surety bonds help to cover the government or water authorities in the event of developers failing to meet the standards that roads and sewers require.
Many different article agreements cover road and sewer bonds, these are;
Road/Highway
- Section 38 Agreement Bond (Highway Act 1980) – Adoption of a New Highway
- Section 278 Agreement Bond (Highway Act 1980) – Alteration to a Public Highway
- Section 184 Agreement Bond (Highway Act 1980)
- Section 220 Agreement Bond (Highway Act 1980) – Advanced Payment Code
- Section 21 Agreement Bond (Road/Scotland/Act 1984) – Adoption of a new Highway
- Section 56 Agreement Bond (Roads Scotland Act 1984)
- Section 96 Agreement Bond (Roads Scotland Act 1984)
- Article 24 Agreement Bond(The Private Streets | Northern Ireland | Order 1980/1992)
- Article 32 Agreement Bond(The Private Streets | Northern Ireland | Order 1980/1992)
Sewer
- Section 98 Agreement Bond (Water Industry Act 1991) – Sewer Requisition
- Section 104 Agreement Bond (Water Industry Act 1991) – Sewer Adoption
- Section 185 Agreement Bond (Water Industry Act 1991) – Public Sewer Diversion
- Article 161 Agreement Bond (Water and Sewer Services Act/ Northern Ireland /2016) – Sewer Adoption
Road and Sewer Bonds fall into a very specialist area of the surety market. To put it simply, they are surety bonds that help to cover the government or water authorities in the event of developers failing to meet the standards that roads and sewers require before adoption. It is an agreement between both the developer and the government to ensure that all parties are happy and are covered.
Many different article agreements cover Road and Sewer Bonds, these are;
Road/Highway
- Section 38 Agreement Bond (Highway Act 1980)
- Section 278 Agreement Bond (Highway Act 1980)
- Section 184 Agreement Bond (Highway Act 1980)
- Section 220 Agreement Bond (Highway Act 1980)
- Section 21 Agreement Bond (Road/Scotland/Act 1984)
- Section 56 Agreement Bond (Roads Scotland Act 1984)
- Section 96 Agreement Bond (Roads Scotland Act 1984)
- Article 24 Agreement Bond(The Private Streets | Northern Ireland | Order 1980/1992)
- Article 32 Agreement Bond(The Private Streets | Northern Ireland | Order 1980/1992)
Sewer
- Article 161 Agreement Bond (Water and Sewer Services Act/ Northern Ireland /2016)
- Section 98 Agreement Bond (Water Industry Act 1991)
- Section 104 Agreement Bond (Water Industry Act 1991)
- Section 185 Agreement Bond (Water Industry Act 1991)
How Do Road & Sewer Bonds Work?
These specialist bonds help cover local governments or water companies in the event of a development not being completed to acceptable standards when the developer wishes to transfer legal responsibility of the road or sewer.. Local authorities are then able to call upon these bonds to secure the necessary funds to bring the roads or sewers back up to an acceptable standard.
How Road and Sewer Bonds work, and also the process of obtaining them, is relatively straightforward, whereby they wish to transfer legal responsibility, councils or water companies will provide the relevant bond wording.
The surety provider will then execute the bond by committing to remedy unsatisfactory work that does not adhere to standards. Once the work has been completed, the local governments will inspect the work and the infrastructure.
Benefits Of Road & Sewer Bonds
Road and Sewer Bonds are not just a legal obligation for developers, they also provide a huge amount of benefits. These benefits are, but not limited to;
- Risk Mitigation – Road and Sewer Bonds help to mitigate risk as they provide both the government and developers a financial guarantee. If developments do not adhere to the strict standards that local governments have, then they can use the surety bond to cover the costs of bringing the development up to the correct standards.
- Enhanced Credibility – Another benefit of these Road and Sewer Bonds is that they can help to enhance your credibility with different contractors and the government. These surety bonds help to show regulatory authorities that the developer has been through thorough vetting and is also less of a financial risk.
- Legal Compliance – Surety bonds, such as Road and Sewer Bonds, help to ensure that developers are legally compliant when wishing to transfer legal responsibility of a road or sewer. This is because these bonds are put in place to ensure that the government or water authorities are compensated if a development does not meet its legal obligations or standards.
- Freeing Up Vital Working Capital at Commencement – Road and Sewer Bonds are an alternative to cash bonds, which require significant cash deposits. As such, by utilising Road and Sewer Bonds developers have access to vital working capital at project commencement.
Consequences Of Not Having Road and Sewer Bonds
Upon failing to get the necessary road and sewer bonds for developments, businesses and developers can be putting themself at risk. This is because there are many different repercussions and roadblocks that projects can face if they do not have the correct bonds.
- Legal Ramifications – One of the most apparent repercussions of not having the correct Road and Sewer Bonds is the legal ramifications that you could be exposed to. The absence of Road and Sewer Surety Bonds can significantly increase the risk of legal complications such as fines and suspensions.
- Delays or Cancellations of Projects – Another very costly repercussion of not having the correct bonds is the possibility of delayed or cancelled projects. You will often find that without the necessary bonds, in place, you may incur delays when attempting to transfer responsibility of the road or sewer to the council/ water company. Delayed projects can have huge financial implications on developments, and cancelled projects can have even more catastrophic consequences.
- Compromise Public Health – The absence of Road and Sewer Bonds can significantly compromise public health in many ways. If a development project fails to meet the standards and requirements for roads and sewers, then this could cause considerable dangers for the public. Poorly maintained roads can cause many health risks, and inadequate sewer systems can increase the spread of diseases such as cholera, dysentery, and hepatitis.
- Struggle to Secure Necessary Approval – Another very obvious roadblock that can be caused by a lack of Road and Sewer Bonds is the struggle for approval. If you fail to have surety bonds like Road and Sewer Bonds, then a lot of local authorities will not grant you the approval and permits that you need for certain projects. This will cause even more costly delays and, in some cases, cancellations of projects.
How Much Do Road & Sewer Bonds Cost?
There are no fixed costs of road and sewer bonds. This is because the costs are very much dependent on several different factors. The main factors that influence the overall cost are the project size, duration, interest rates, and financial history.
While the exact costs of these Road and Sewer Surety Bonds can differ drastically, here at RS Bonds, we can be sure to offer the best prices. This is because we have a price guarantee that ensures that we will beat any comparable price.
RS Bonds: UK’s Leading Road and Sewer Bond Specialist
RS Bonds is the only company in the UK that solely specialises in the procurement of Road and Sewer Bonds. We have a combined 50 years of industry experience and can provide you with exceptional technical advice about the surety market. If you have any questions, please contact us, and our knowledgeable team will be happy to assist you with any queries.
