Road and sewer bonds are a legal requirement for all developments across the United Kingdom where housebuilders wish to transfer responsibility of a road or sewer to the local authority or water company that adopts the road or sewer. However, a lot of new developers can typically be unaware of the exact type of bonds that they need and why exactly they need them.
In this article, we will be focusing on a very specialist area of the surety industry, road and sewer bonds. We will look at what exactly they are, why they are needed and how much they cost. This will help you to better understand Road & Sewer bonds and streamline your overall development processes.
What Are Road & Sewer Bonds?
Road and sewer bonds fall into a very specialist area of the surety market. The bonds are put in place to provide a financial guarantee from an underwriter to local authorities and water companies. This falls within a developer’s obligations when aiming to achieve the adoption of a site’s highway or sewer.
To put it simply, It is an agreement between both the developer and the government to ensure that all parties are happy and are covered. This is because these surety bonds help to cover the government or water authorities in the event of developers failing to meet the standards that roads and sewers require.
Many different article agreements cover road and sewer bonds, these are;
Road/Highway
- Section 38 Agreement Bond (Highway Act 1980) – Adoption of a New Highway
- Section 278 Agreement Bond (Highway Act 1980) – Alteration to a Public Highway
- Section 184 Agreement Bond (Highway Act 1980)
- Section 220 Agreement Bond (Highway Act 1980) – Advanced Payment Code
- Section 21 Agreement Bond (Road/Scotland/Act 1984) – Adoption of a new Highway
- Section 56 Agreement Bond (Roads Scotland Act 1984)
- Section 96 Agreement Bond (Roads Scotland Act 1984)
- Article 24 Agreement Bond(The Private Streets | Northern Ireland | Order 1980/1992)
- Article 32 Agreement Bond(The Private Streets | Northern Ireland | Order 1980/1992)
Sewer
- Section 98 Agreement Bond (Water Industry Act 1991) – Sewer Requisition
- Section 104 Agreement Bond (Water Industry Act 1991) – Sewer Adoption
- Section 185 Agreement Bond (Water Industry Act 1991) – Public Sewer Diversion
- Article 161 Agreement Bond (Water and Sewer Services Act/ Northern Ireland /2016) – Sewer Adoption
How Do Road & Sewer Bonds Work?
These specialist bonds help cover local governments or water companies in the event of a development not being completed to adoptable standards. Local authorities are then able to call upon these bonds to secure the necessary funds to bring the roads or sewers back up to an adoptable standard.
How road and sewer bonds work and also the process of obtaining them is relatively straightforward. Once a developer or a development has committed to road and/or sewer construction, local government agencies will draft the bond wording/legal agreement in preparation for it to be issued by the surety provider.
The surety provider will then execute the bond by committing to remedy unsatisfactory work that does not adhere to standards. Once the work has been completed the local governments will inspect the work and the infrastructure to decide whether or not it has been done to their strict standards.
Benefits Of Road & Sewer Bonds
Road and sewer bonds are not just a legal obligation for developers, they also provide a huge amount of benefits that make them so beneficial. These benefits are, but not limited to;
Risk Mitigation – Road and sewer bonds help to mitigate risk as they provide both the government and developers with a financial guarantee. If developments do not adhere to the strict standards that local governments have, then they can use the surety bond to cover the costs of bringing the development up to the correct standards.
Legal Compliance – Surety bonds such as road and sewer bonds help to ensure that developers are legally adopted for roads or sewers. This is because these bonds are put in place to ensure that government or water authorities are compensated if a development does not meet its legal obligations or standards.
Payment Protection – Road and sewer bonds provide payment protection to local and water authorities to guarantee that work is completed and that they are covered if a developer fails to meet their standards.
What Happens If You Don’t Have Road & Sewer Surety Bonds
Upon failing to get the necessary road and sewer bonds for developments, businesses and developers can be putting themself at risk. This is because there are many different repercussions and roadblocks that projects can face if they do not have the correct bonds.
Legal Ramifications – One of the most apparent repercussions of not having the correct road and sewer bonds is the legal ramifications that you could be exposed to. The absence of road and sewer surety bonds can significantly increase the risk of legal complications such as fines and suspensions.
Delays or cancellations of projects – Another very costly repercussion of not having the correct bonds is the possibility of delayed or cancelled projects. You will often find that without these bonds, you will struggle to get the necessary approval. This can then cause major roadblocks and setbacks. Delayed projects can have huge financial implications on developments and cancelled projects can have even more catastrophic consequences.
Compromise public health – The absence of road and sewer bonds can significantly compromise public health in many ways. If a development project fails to meet the standards and requirements for roads and sewers then this could cause considerable dangers for the public. Poorly maintained roads can cause many health risks and also inadequate sewer systems can increase the spread of diseases such as cholera, dysentery and hepatitis.
How Much Do Road & Sewer Bonds Cost?
There are no fixed costs of road and sewer bonds. This is because the costs are very much dependent on several different factors. The main factors that influence the overall cost are the project size, duration, interest rates, and also financial history.
While the exact costs of these road and sewer surety bonds can differ drastically, here at RS Bonds we can be sure to offer the best prices. This is because we have a price guarantee that ensures that we will beat any comparable price.
RS Bonds is the only company in the UK that solely specialises in the procurement of road and sewer bonds. We have a combined 50 years of industry experience and can provide you with exceptional technical advice about the surety market.
You can find out how much your road and sewer bond will cost by filling in our online Quote Request Form today.
