A Section 38 Agreement is put in place between the developer and the local authority to ensure the completion and adoption of a new road system on a development. The agreement is voluntary and between a developer and the Council.

The developer agrees to a bond (usually backed by an insurance policy taken out by the developer) or cash collateral to the value of the road works.  The bond/cash is kept in place until the roadway has been adopted by the local authority.  The developer agrees to build the road to adoptable standard.  The bond/cash value is usually sufficient to ensure the Council can construct/repair the road if the developer fails to do so.

The Section 38 Agreement is in place to cover developer/contractor failure either by sub-standard works or liquidation of the contracting company prior to completion of the works or adopting the road.

The Section 278 Agreementis in respect of the bond taken out with the local authority to cover junction alterations. (Examples are turning circles, access points, crossings, roundabouts, traffic signals etc.)

It may be the case that on some developments there is a Section 38 in place for the roads within the estate and a Section 278 Agreement for the junction of the estate road and the nearest adopted highway.

Legal advice should be sought prior to entering into the Section 38 and 278 Agreement.


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