A Section 38 agreement is intended to ensure the completion and adoption of a new road on a new development. It is a voluntary agreement made between a developer and the local authority. This agreement requires a bond, which is sufficient to ensure the local authority has access to funds to satisfy the developers’ outstanding obligations, should they default on the particulars of the agreement.

Once the road has been constructed to an agreed standard, the new highway is then adopted by the local authority. Adoption of a new highway means that the local authority will maintain the road for the foreseeable future, and at the publics’ expense.

After receipt of Building Regulation approval, the developer should receive a notice under Section 220 of the Highways Act 1980. The assessment is made by the Highway Authority and will either be in the form of charges for individual plots, or a block assessment covering the whole development. The developer should pay the sums assessed, or alternatively enter into a Section 38 Agreement before any work commences on the construction of any building on the development.

In such cases, the bond covering the full estimated construction cost of the roads will be greatly in excess of the amount which would then be required to bring the road up to adoption standards. In such cases, the Highway Authority will, at its discretion, allow a reduction in the bond to a suitable figure which will, in its estimation, cover the cost of the outstanding work.