When a site being developed for residential housing includes roads and pathways which are to be adopted by the local authority, a critical legal and practical consideration is ensuring that an appropriate section 38 agreement (under the Highways Act 1980) is in place prior to the commencement of the development works. A section 38 agreement governs the adoption of new estate roads by the local highway authority and sets out the steps to be followed to secure adoption.

Reasons why section 38 agreements should be in place before as soon as possible prior to development

1. Having a signed agreement in place with the local authority provides comfort that the road will be adopted once the criteria for adoption within the agreement have been met.
2. Provides clarification as to the design, construction standards and future maintenance of the roads and footpaths. This is important as buyers and their mortgage lenders routinely require confirmation that all estate roads and footpaths will be or have been adopted to ensure that they will not be called upon to contribute towards any future maintenance costs in respect of the upkeep of the roads and footpaths serving the property.
3. Planning permissions can be subject to conditions requiring satisfactory arrangements for the adoption of the highway and as such failure to enter into a s.38 agreement may constitute a breach of that condition.
4. Utilities and service providers often require evidence that roads will be adopted before installing infrastructure. Without and agreement in place services may be delayed or withheld which would result in the development stalling.

Risks of not progressing a s.38 agreement at the outset

1. If an agreement is not agreed at the outset, there is no guarantee that the highway authority will agree to adopt the roads later. This may not be acceptable to a buyer or their lender as it can leave them open to unexpected maintenance costs.
2. Local authorities often require that a performance bond is paid under the s.38 agreement to cover the costs of completing the highway works in the event that the developer defaults. If a developer does not progress an agreement early on, they may struggle to secure or budget for the bond.
3. Residents on developments with unadopted roads may face issues with refuse collection, street lighting and road maintenance which can lead to complaints by residents, reputational damage and possible legal disputes.
4. Lenders financing residential developments may require that road adoption agreements are in place. Failing to so do can result in financing delays or refusals.

It is clear that failing to agree and enter into a s.38 agreement at the outset of a residential development can have substantial complications for both developers and buyers, from hindering plot sales to causing long-term liability for road maintenance. Prioritising the s.38 agreement from the outset is not only best practice but essential for ensuring that the development progresses smoothly and without delay.