The different mechanisms of road adoption in England
Many people on new build estates in England have to deal with issues of road adoption, which can take years.
There are, as I understand it, three mechanisms under the Highways Act 1980:
- section 37: dedication by the owner/developer
- section 38: adoption via an agreement between a council and the owner/developer
- sections 229 and 228: adoption unilaterally by the council, possibly after a residents' vote
These all arise in different circumstances, depending on who is initiating the process, and have different safeguards and veto-players.
The underlying situation is that roads require ongoing maintenance and ongoing maintenance requires ongoing money. Highways that are not "maintainable at public expense" (in the terminology of the Act) are perforce maintainable at the expense of someone else, by default the owners of the property that fronts onto the street in question (see section 205 of the Act). In practical terms, roads must often be "made up" to an appropriate standard before adoption, and the detail of the various procedures often turns on the availability of the initial lump sums thereby necessitated.
Most of my adult life, I've not lived in accommodation that fronts onto the public highway, and this is probably becoming more common due to the slow rate of road adoption on the growing proportion of residential property that is on build estates. But the same occurs on old roads which residents don't want to see adopted: it's not just a "new build" issue that will one day go away.
Indemnity covenants
If unadopted roads are so common, why does one never hear about individual households getting billed for the roads due to section 205? The answer for new builds is simply idemnities. The developer agrees to a covenant that protects future homeowners from being charged for the roads until they're adopted:
The Transferor covenants with the Transferee and his successors in title [...] to make up the [...] Adoptable Estate Roads and the [...] to the required standards of the relevant Authorities and to maintain and upkeep the same to the relevant adoptable standards and to indemnify the Transferee against all costs claims and demands arising from any failure to do so pending such adoption [...]
The Landlord covenants with the Tenant to construct and maintain or procure the construction and maintenance of the Estate Roads and/or the Estate Sewers and such of the main drains and sewers as it is intended should be adopted to the requirements of the highway authority and drainage authority and to indemnify the Tenant against all costs claims and demands arising from any failure to do so until the Estate Roads and Estate Sewers become maintainable by the relevant Public Authority
Of course, developers can go bankrupt which may render the indemnity worthless. It is commonplace in the secondary market on new build estates (at least on those estates where there still *is* a secondary market) for sellers to find their buyer's solicitor asking for an indemnity against the roads not being adopted. This ask will be coming from someone who's main job is to read the property deeds that contain just such an indemnity. This can lead to absurd situations where a buyer and seller are both on the same development, and both have the same indemnity in their deeds, and are paying their lawyers to negotiate about getting a second indemnity, effectively taking out a credit default swap on a plc housebuilder in which they might even also own shares.
Unfortunately, some people *have* heard about individual homeowners getting billed for road maintenance, allegedly making their homes unsellable. It is galling to see desperate sellers who *are* protected by indemnities driven out of their minds by the fear of having to pay for road maintenance because someone somewhere else once bought a property that wasn't so indemnified. Someone has told them that there's "no section 38" agreement, as though that were the end of the matter. The reason there's no section 38 agreement on a lot of new build estates is that they haven't been fully built. And it's not as though section 38 agreements are the only way to adopt roads, as explained above. It's a little too easy for conveyancers to run up on costs on this.
Adoption avoidance covenants
The Highways Act does not have anti-avoidance provisions, so covenants like this have started to show up on the Land Registry:
For the benefit of the Council (as defined in te Section 106 Agreement dated 27th October 2016) and the Transferor not to make an application to the Council or petition the Council for the Management Areas to be taken over or adopted by the Council whether by agreement or pursuant to any statutory procedure enabling or requiring the Council to adopt or otherwise to take over any such estate roads forming part of the Management Areas as highways maintainable at the public expense
That, right there, is a developer and a local authority teaming up to strip homeowners of the protections in the Highways Act(!)
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