Road and Sewer Bonds
Short-term financing solutions
A Road Bond is a guarantee. Also known as a Section 38, this is an agreement that is put in place between the Developer and the Council or relative 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 Bond or place cash collateral to the value of the Road Works and covers that roadway until the end of the Making Good of Defects period and issue of the final certificate by the Council at the point of adoption. The Bond risk ceases at this point. The value is usually sufficient to ensure the Council can construct/repair the road if the developer fails to do so.
FAQs
Short-term financing solutions
A section 38 Agreement starts initially with the local authority preparing a draft agreement for the developer, incorporating the proposed works. The developer and their bond provider (surety) then sign the agreement before it is formally completed by the Council.
Section 38 agreements are designed to ensure that roads and associated infrastructure are built to an acceptable standard and can be adopted by the local authority once completed. They also provide protection in the event of developer or contractor failure, such as substandard workmanship or insolvency before completion or adoption of the works.
A Sewer Bond can also be a requirement by a local authority. A Section 104 agreement is a legal arrangement between a developer (or other owner of a private sewer) and the relevant water authority. It sets out the terms under which the sewer must be constructed to an agreed standard and maintained for a specified period. Once these conditions are met, the water authority will adopt the sewer, and it will become part of the public sewer network.
