Adoption of roads as highways maintainable at public expense

Victoria Longmore, partner in Lodders’ Real Estate department, and Michael Orlik, consultant, provide an updated briefing on the adoption of roads as highways which are maintainable at the expense of the public.

1. The usual way for a new road to be adopted is by an agreement entered into between the Landowner and the Local Highway Authority under the Highways Act 1980 Section 38. Under Subsection (6) the agreement may contain such provisions as the bearing of the expenses of the construction, maintenance or improvement of the road:- “… and other relevant matters as the authority making the agreement think fit”.
2. In recent years, as pressure on local authority budgets has increased, Highway Authorities have not been keen to take on further responsibilities by adopting new roads. In consideration of entering into Section 38 Agreements, Highway Authorities have been demanding increased amounts of money by way of commuted sums towards the cost of future maintenance. In 2014, Redrow Homes challenged a requirement of Knowsley Metropolitan Borough Council that they should pay £39,000 towards the maintenance of street lighting on their Estate in
   future. The case was heard in the High Court.
3. The Judge said that on a correct interpretation of Section 38(6) an agreement under the section could contain provision for the Landowner dedicating the road as a highway to pay sums referable to the expenses of highway maintenance even after it had become maintainable at the public expense. The Court of Appeal upheld the Judge’s decision.
   However in doing so the Court said:- “A developer will not enter into a Section 38 Agreement unless he thinks that it is in his interest to do so. If the Highway Authority is only prepared to offer a deal which is not commercially acceptable to the developer, then he will use the machinery of Section 37.… A developer cannot be compelled to enter an agreement under Section 38 and is most unlikely to enter into an agreement unless he considers it to be in his commercial interests to do so.”
4. Section 37 operates very differently from Section 38. As explained in paragraph 7 below it may involve the developer in building the road without the supervision of the Highway Authority which could lead to difficulties at the adoption stage. Section 37 should be seen as an option if negotiations with the highway authority over the terms of the section 38 agreement
   break down over unreasonable engineering requirements or demands for excessive commuted sums.
5. In relation to a Section 37 the Landowner (Freeholder), who is also usually the developer, serves notice that he intends to build a road and dedicate it as a highway maintainable at public expense. The Notice has to be accompanied by a plan describing the location and width of the proposed highway. Within 3 months of the Notice being served the Highway Authority has the right to ask the local Magistrates or District Judge to determine that the proposed highway:- “…will not be of sufficient utility to the public to justify its being maintained at
   the public expense.”
6. To date there has not been a case on section 37 which has reached the High Court with the consequence that there is no precedent as to how the higher courts will apply it. District Judges have tended to accept the argument of Councils that the wording means that the limited financial resources available to Councils are a relevant consideration and that, even though a road serves thirty or forty new houses, it is not of sufficient public utility to the public to justify spending scarce funds on its maintenance. While there may be little argument over a spine road serving the whole estate, particularly if it is built to take buses, the Court may have little sympathy with cul-de-sacs serving only the houses fronting them. In a case, however, which went to the Crown Court, on an appeal from the District Judge, the Court, as well as considering the houses served by the roads, was prepared to look at pedestrian and cycle access which could be obtained via the end of the cul-de-sac to reach other roads, a cycleway, the open space surrounding a balancing pond, and a retail park.
7. If the Council do not object at the first stage that the road will be not be of sufficient utility, or the Court has overruled an objection, there is a second stage before adoption occurs The Developer will proceed to construct the roads. He then asks the Council for a Certificate that the road has been “made up in a satisfactory manner”. If the Council refuses to grant the Certificate the Developer can apply to the local Magistrates for an Order that a Certificate should be issued if he can show that the road has been satisfactorily made up. To avoid this sort of problem at the second stage it is wise for the Developer either to offer to pay the Council to carry out inspections as construction of the road proceeds or to instruct an independent Consulting Chartered Engineer to supervise the work so that he can certify to the Court that the road has been properly made up.
8. Hitherto the Engineers of the Local Highway Authority, mindful of the power to impose such provisions as they “think fit”, have often adopted a take it or leave it approach when demanding commuted payments. The initial step of serving a Section 37 Notice is sometimes enough to bring the Highway Authority Engineers back to the negotiating table with the result that a compromise is reached on the amount of the commuted sums required.
9. In one case that Lodders represented a Client on, the Highway Authority said that it would never accept a SUDS drainage scheme but it changed its position when a Section 37 Notice was served.
10. In another case where we acted for a Developer, a commuted sum of £40,000 was required for the maintenance of a small footbridge. This was reduced to £20,000 on service of a Notice.
11. No commuted sums can be required under the Section 37 procedure. Also, the Highway Authority will lose the opportunity to charge inspection fees as the work proceeds unless asked to carry out inspections by the Developer. Consequently, the Highway Authority may moderate its terms so that adoption can take place by way of Section 38. From the point of view of the Developer, whilst commuted payments cannot be demanded under Section 37, there is risk and uncertainty that, after he has carried out the expensive works of constructing the road, the Highway Authority will refuse to agree that it has been built satisfactorily and the local Magistrates may support the Authority. From the point of view of both parties, it is preferable to enter into a Section 38 Agreement so long as the agreement is not such that it is not in the commercial interests of the Developer to accept it.
12. It may also happen that a Developer completes a road in accordance with a Section 38 Agreement but the Highway Authority Engineers refuse to accept that the works have been carried out satisfactorily. It is not too late at that stage, if agreement cannot be reached on the remedial works, to initiate the Section 37 procedure. That again often results in the Local Authority Engineers sitting down with the Developer’s Engineers and hammering out a finite list of remedial works or accepting a sum in lieu for the Council to carry out the remedial works before the matter gets into Court.
13. There is also an opportunity to use section 37 where there is no dispute about the road being of sufficient utility but the Council refuses to adopt because it considers the design of the roads to be unsatisfactory. In one case, where Lodders represented the housebuilder, the roads served fifty-five houses and some flats. The Council insisted that all the roads should be 5.5 metres wide. The District Judge found that 5.5 metres was right for the spine road but the cul-de-sacs off the spine road serving only twelve or so houses could be 4.8 metres in width. The result does show that Local Highway Authorities could find themselves in difficulties if they are inflexible in their Section 38 requirements without having regard to the circumstances
    of an individual scheme.

This briefing note was produced by Victoria Longmore, partner in Lodders’ Real Estate department, and Michael Orlik, consultant.