Section 38 adoption of estate roads and commuted sums

A section 38 agreement is the contract under which a highway authority agrees to adopt the roads you build, so that they become maintainable at public expense and the liability leaves your balance sheet. Getting one takes longer than most developers programme for, and the two items that surprise people are the bond and the commuted sums. Both are quantifiable early, and neither is negotiable late.

The provision is section 38 of the Highways Act 1980. Its companion, section 278, covers works to an existing highway, and a scheme with a new estate road connecting to a public road usually needs both.

What section 38 actually does

An agreement under section 38 records that the developer will construct the road to the authority's standards, will maintain it for a defined period after it is substantially complete, and that the authority will then adopt it. Adoption transfers future maintenance to the public purse.

Three things follow from that. The authority will only adopt what it is prepared to maintain for the next several decades, so the specification is theirs and not yours. It will secure performance with a bond or other surety before work starts. And it will charge for the design checking and site inspection that go with it.

Adoption is discretionary. There is no right to have a road adopted, and authorities apply criteria on geometry, gradient, drainage, lighting, service margins, turning provision for refuse vehicles and the number of properties served. Read those criteria before the layout is drawn, not after.

The sequence, and where it stalls

The order is fixed and each stage gates the next.

1. Pre-application discussion on adoptability, ideally at the same time as the planning pre-application, so the layout satisfies both.
2. Technical approval of the detailed design: horizontal and vertical alignment, construction build-up, drainage, lighting, street furniture, materials and landscape within the highway.
3. Agreement of the bond value and the fees, and execution of the section 38 agreement.
4. Construction under inspection.
5. Provisional certificate, followed by the maintenance period, commonly twelve months.
6. Final certificate and adoption, with the bond released.

Stalls cluster at stage two, and the causes repeat. Levels that do not work once the drainage is designed properly. A drainage strategy relying on a system the sewerage undertaker will not adopt under a section 104 agreement, leaving an orphan asset with no future owner. Utility apparatus routed through the carriageway rather than the service margin. Street trees drawn in the footway with no rooting volume and no maintenance arrangement.

The fix for all four is the same. Coordinate the highway design, the drainage strategy and the utility layout in one exercise before submitting for technical approval, rather than sending three consultants' drawings that were never overlaid.

Bonds, fees and the advance payments code

The bond secures completion of the works if the developer fails. It is sized on the estimated cost of the outstanding works, usually with an uplift, and it is released in stages as sections are completed and certified. Bond capacity is a real constraint for small developers, and arranging it takes weeks.

Fees cover technical checking and site supervision, and authorities publish their charging basis, commonly as a percentage of the works value. Check the current published rates rather than a figure from a previous scheme.

Then there is the advance payments code in the Highways Act 1980. Where buildings are erected on a private street, the authority can require a payment or security to cover the future cost of making the street up, unless a section 38 agreement is in place. Developers who decide to leave roads private sometimes meet this provision unexpectedly, and it is worth checking with the authority before assuming a private street avoids all highway cost.

Commuted sums, and what triggers them

A commuted sum is a capital payment to the authority covering the extra whole life maintenance cost of something it would not normally have to maintain. Authorities publish commuted sum policies, and the arithmetic is usually a maintenance and replacement profile over a stated design period.

The items that most often attract one are predictable.

• Street trees, tree pits, root barriers and irrigation systems.
• Surface water features within the highway, including permeable paving, swales, filter drains and attenuation, particularly where the sewerage undertaker will not adopt them.
• Non-standard surfacing: block paving, natural stone, coloured or textured materials, shared surfaces.
• Structures such as retaining walls, culverts, headwalls and footbridges.
• Street lighting above the standard specification, and traffic signals.
• Grass verges, planting beds and boundary features within the highway.

Design decisions therefore have a maintenance price. A shared surface in reconstituted stone across an entire estate can carry a larger commuted sum than the extra construction cost, and the sum is payable before adoption regardless of how the units sold.

Illustrative example: a scheme of 60 houses specifies block paved shared surfaces, 40 street trees in the footway and a swale along the spine road. The commuted sum quoted at technical approval stage was large enough to reopen the specification. Moving the swale into open space outside the highway, and putting half the trees into private front gardens, removed most of it without changing the character of the street.

Private streets and management companies

The alternative is to keep the roads private and set up a management company funded by an estate charge. It removes the bond, the commuted sums and the adoption fees, and it introduces a different set of problems.

Purchasers pay an ongoing charge and lenders ask questions about the arrangement. Refuse collection, gritting and street lighting have to be arranged privately or negotiated with the council. And section 106 agreements increasingly require either an adoption agreement or a properly constituted management arrangement, so the choice may not be entirely yours.

Where a scheme is large enough that the estate roads function as through routes, adoption is usually the right answer. Where the layout is a short private drive serving a handful of houses, a management arrangement is often more sensible.

Programming adoption into the scheme

Three habits keep this off the critical path.

Start technical approval at the same time as the planning application, not after permission. The two processes ask different questions about the same drawings, and running them in parallel exposes conflicts while there is still time to resolve them.

Get an early written indication of the commuted sum basis from the authority, and price the specification against it before the design is fixed.

Keep the highway design, the drainage design and the construction traffic management plan consistent with each other, because the same officer often reviews all three and inconsistency between them slows every one of them down.

On drainage, note that the sustainable drainage approval regime in Schedule 3 to the Flood and Water Management Act 2010 has not been brought fully into force in England, so adoption of surface water features remains a matter of negotiation between the developer, the highway authority, the lead local flood authority and the sewerage undertaker. Settle who owns each asset before construction, in writing.

This is general guidance rather than legal advice. Check the position with your local highway authority or a qualified professional before relying on it.

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