What Is A Section 38 Agreement And Bond?

The construction of new housing estates and commercial developments often involves the creation of new roads. These roads may eventually become public highways, maintained by the local highway authority. However, before this can happen, a legal framework needs to be established to ensure the road is built to a satisfactory standard and that the developer meets their obligations.

This is where Section 38 agreements and bonds come into play. They are crucial aspects of the road adoption process under the Highways Act 1980, specifically Section 38. In this article, What Is A Section 38 Agreement And Bond, we take a look at the process and mechanism involved.

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For a free initial discussion with a member of our New Enquiries Team, get in touch with us today. We are experienced in dealing with all the legal aspects of section 38 agreements and bonds, and once instructed, we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you are on the best possible footing from the start and also avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.

What is a Section 38 Agreement?

A Section 38 agreement is a voluntary agreement between a developer and a local highway authority. It sets out the terms under which a newly constructed road on a development will be adopted as a public highway.

The agreement typically covers the following:

• Standards: The agreement will specify the standards to which the road must be built. This includes the road surface, footpaths, drainage, lighting, and any necessary structures. These standards ensure the road is safe, functional, and meets the needs of the future public users.
• Adoption Process: The agreement will outline the process for the local authority to adopt the road. This may involve inspections to ensure the road meets the agreed standards and the completion of any outstanding works.
• Financial Contributions: The developer may be required to contribute financially towards the future maintenance of the road. This can be a one-off payment or an ongoing contribution.
• Remedial Works: The agreement may also set out the process for addressing any defects in the road after construction. This ensures the developer remains responsible for any issues arising from poor workmanship.

What is a Section 38 Bond?

A Section 38 bond is a financial guarantee typically provided by a specialist bonding company on behalf of the developer. The bond acts as a safety net for the local highway authority.

The bond value is usually set at 110% of the estimated cost of constructing the road to the required standard. This buffer accounts for potential unforeseen costs.

The local authority can call upon the bond if the developer:

• Fails to complete the road construction to the agreed standard.
• Does not remedy any defects identified after construction.
• Defaults on any financial contributions towards future maintenance.

The bond ensures the local authority has the financial resources to complete the road themself or rectify any issues if the developer fails to meet their obligations.

Benefits of Section 38 Agreements and Bonds

Section 38 agreements and bonds offer significant benefits for both developers and local authorities:

For Developers:

• Certainty and Clarity: The agreement provides a clear framework for the road adoption process, reducing uncertainty and potential delays.
• Peace of Mind: Having the bond in place demonstrates the developer’s commitment to completing the road to a high standard.
• Marketability: Potential buyers are more likely to be interested in properties with adopted roads, as these roads are maintained by the local authority, reducing future costs for residents.

For Local Authorities:

• High-Quality Roads: The agreement ensures new roads are built to a satisfactory standard, minimizing future maintenance costs for the authority.
• Financial Security: The bond provides a financial guarantee, protecting the authority from losses if the developer defaults on their obligations.
• Planned Development: The process allows for the orderly adoption of new roads into the highway network, facilitating future maintenance and infrastructure planning.

Blackstone Solicitors: Your Partner in Road Adoption

Blackstone Solicitors has a proven track record in advising developers and local authorities on Section 38 agreements and bonds. Our experienced team can guide you through the process, ensuring a smooth and successful road adoption.

We can assist with:

• Negotiating the terms of Section 38 agreements.
• Securing Section 38 bonds from reputable providers.
• Liaising with local highway authorities throughout the adoption process.
• Resolving any disputes that may arise during the process.

How we can help

We have a proven track record of helping clients deal with the legal aspects of section 38 agreements and bonds. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.

How to Contact Our Commercial Property Solicitors

It is important for you to be well informed about the issues and possible implications of section 38 agreements. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.

To speak to our Commercial Property solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.

Authored by Ben Posted in Blog, News Tagged as

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