Section 278, section 38 and section 106: which secures what

Section 278 buys you changes to somebody else's highway. Section 38 hands your new streets over to the highway authority to maintain. Section 106 makes the development acceptable in planning terms. Three agreements, three statutory bases, three sets of lawyers, and a recurring pattern on major schemes where the same junction ends up secured twice and paid for once.

The distinction matters commercially. A section 106 obligation binds the land and survives a sale. A section 278 agreement is a contract with the highway authority that has to be entered into before the works can lawfully be built, and no amount of planning drafting substitutes for it.

Three agreements, three statutory bases

In a two-tier area the highway authority is the county council and the planning authority is the district, which means two organisations, two legal teams and two timetables. In a unitary or London borough they are the same body, which helps with coordination and does nothing to merge the legal routes.

The detailed mechanics of the two highways agreements are set out in our note on section 278 works and section 38 adoption compared. What follows concentrates on how all three fit together on one scheme.

Works in the existing highway under section 278

Section 278 covers anything you need to do to the adopted highway to make the development work. A new bell-mouth access, a ghost island right turn, signal modifications, a pedestrian crossing, footway widening, traffic calming, a bus stop relocation, changes to lining and signing.

The highway authority will not simply take a cheque. The process runs through technical approval of the design, road safety audits at the appropriate stages with designer responses, a formal agreement, a bond or other security for the value of the works, and inspection and supervision fees calculated as a percentage of the works cost. Any traffic regulation order needed for waiting restrictions or a speed limit change runs on its own statutory timetable with its own consultation and cannot be assumed.

Two things regularly surprise developers. Design approval can take longer than the planning application, so start it in parallel rather than after decision. And the authority is under no obligation to agree works that do not benefit the public, which is the statutory test, so a purely private access improvement can be refused.

For a single dwelling or a small scheme, a vehicle crossing licence under section 184 of the same Act is usually the right route rather than a full agreement. Ask the highway authority which they want before you instruct a designer.

Adoption of new streets under section 38

Section 38 is about what happens to the roads you build inside the site. If they are to be publicly maintained, the authority agrees a specification, inspects construction, takes a bond, holds a maintenance period and then adopts.

The specification is where budgets move. Authorities set their own design guides, and requirements for construction depth, street lighting, trees in the highway, surfacing materials and drainage arrangements vary considerably. Commuted sums are payable for items the authority will maintain but would not normally provide, which commonly means street trees, non-standard surfacing, structures and any sustainable drainage within the highway. Get an early written indication of those sums, because they can be material on a scheme of 50 to 150 units.

Drainage has its own track. Foul and surface water sewers intended for adoption are dealt with under section 104 of the Water Industry Act 1991 with the sewerage undertaker, not with the highway authority, and the two adoption processes have to be reconciled at design stage rather than on site.

Private streets are a legitimate choice. They avoid the specification and the commuted sums, at the cost of a management company, an estate rentcharge and a service charge that has to be disclosed to buyers. Many authorities now resist wholly private arrangements on larger sites, and some adopted plans say so.

Planning obligations under section 106

A planning obligation is used where a condition cannot do the job, typically because money has to change hands, land has to be transferred, or something has to be delivered off site. It has to meet the three tests in regulation 122 of the Community Infrastructure Levy Regulations 2010: necessary to make the development acceptable in planning terms, directly related to the development, and fairly and reasonably related in scale and kind.

On a residential scheme the usual heads of terms are affordable housing tenure and mix, education and health contributions where the authority's evidence supports them, open space and play provision with a maintenance arrangement, biodiversity net gain where off-site units or a management plan are involved, travel plan monitoring, and a covenant to enter into the highways agreements. The affordable housing terms should track the position set out in the Affordable Housing Statement rather than diverging from it during drafting.

Review mechanisms and overage are increasingly standard on schemes where viability is argued, and they need care because a badly drafted trigger can catch an unrelated disposal. Our note on overage clauses and review mechanisms sets out the drafting points.

An obligation is a local land charge and binds successors in title. It can be modified or discharged by agreement at any time, or by application to the authority after five years with a right of appeal.

Where the same works get paid for twice

The overlap to watch is a junction improvement that appears as a section 106 financial contribution, as a section 278 obligation, and as an item in the authority's infrastructure funding statement supported by the community infrastructure levy. Each route is lawful. Using more than one for the same item is not.

Three checks close most of the gap.

1. Ask the authority for its most recent infrastructure funding statement and check whether the works you are being asked to fund are already listed as levy-funded.
2. Make sure the section 106 covenant obliges you to enter into a section 278 agreement and to carry out defined works, rather than obliging you both to pay a contribution and to build the same thing.
3. Where a contribution is sought, ask what it will be spent on, when, and what happens if it is not spent. A clawback period of five or ten years with repayment of unspent sums is normal and reasonable to ask for.

The pooling restriction that once limited authorities to five obligations per infrastructure project was removed in 2019, so the old argument that a contribution was unlawful because too many had been pooled no longer runs. The regulation 122 tests still do, and they remain the right place to push back on a contribution that is not related to your development. Reform in this area has been announced repeatedly without being brought into force, and our note on the Infrastructure Levy separates what is in force from what is not.

Sequencing, bonds and the cash you have to find

Set the triggers deliberately, because they control cash flow more than the headline sums do.

A typical sequence on a 100-unit site runs: complete the section 106 before the decision notice is issued, since most authorities will not release the permission until it is signed. Discharge pre-commencement conditions. Enter into the section 278 agreement and lodge the bond before any work starts in the highway. Enter into the section 38 agreement before the estate roads are built, or accept the risk of building to a specification that later turns out not to meet the authority's requirements. Deliver the access works to the trigger point in the permission, often first occupation.

Budget for the bonds as well as the works. Each agreement carries security, usually a bond or cash deposit covering the works value plus a margin, and fees on top. On a mid-sized residential scheme the combined bonds, fees and commuted sums are a real line in the appraisal rather than a rounding error, and they should be tested in the appraisal alongside the evidence in the Transport Assessment.

This is general guidance, not legal advice. Agreement terms, fees and commuted sums are set locally, so confirm them with the relevant authority and take legal advice before committing. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval.

Browse all 66 PlanScope report types to build the evidence base behind the obligations you are being asked to sign.