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Developer funding of adopted highways

Print publication

16/12/2014

Where roads and highways are constructed as part of new developments, it is generally envisaged that these will become public highways maintainable at the public expense at some stage after the scheme’s completion. Under section 38 of the Highways Act 1980 (the Act), the local highway authority can agree to subsequently adopt roads that have been constructed to a specified standard. In the past, it has generally been accepted that Section 38 Agreements place liability for roads on the developer up to adoption, but with liability ceasing and transferring to the highway authority thereafter. However, R (on the application of Redrow Homes Ltd) v Knowsley Metropolitan Borough Council has put this assumption in doubt.

Background

The case involved roads forming part of a 525-dwelling residential development at Huyton, near Liverpool. While both parties wished for the roads to be adopted, Knowsley Metropolitan Borough Council (the Council) refused to enter into a Section 38 Agreement unless Redrow (the Developer) agreed to contribute a capital sum of approximately £39,000 for future maintenance of street lights.

The Council suggested its request was lawful, based on the provisions within section 38(6) of the Act. This provides that “an agreement under this section may contain such provisions as to the dedication as a highway of any road or way to which the agreement relates, the bearing of the expenses of the construction, maintenance or improvement of any highway…to which the agreement relates and other relevant matters as the authority making the agreement think fit”. The Council therefore suggested they were acting within their discretionary powers in requesting the ongoing street-light contribution.

At the initial trial in the Administrative Court, Judge Michael Fordham QC found in the Council’s favour.

Court of Appeal

On appeal, the Developer argued that the Council’s requirement was contradictory to the purpose of section 38 – which is to turn private roads into public highways, maintained by the authority at the public expense.

However, the Court found that section 38(6) does not incorporate such qualifications. The key findings were:

  • The relevant section of the Act is widely-drafted and expressed in unqualified terms. In particular, there is no distinction between periods before and after the road comes to be publicly maintained.
  • The phrase “maintainable at the public expense” does not specify how a highway authority should discharge its responsibilities. This is left to the individual authority’s discretion. The authority can either maintain the road itself or require this of a developer. Similarly, it can use:

– public funds;
– monies obtained from the developer; or
– a combination of the two.

  • The legislation is not intended to exclude the possibility of roads either being (1) privately maintained or (2) the cost of maintenance coming from private contributions where highways maintainable at the public expense are involved.
  • Regardless of the approach the authority decides upon, if the highway is not maintained as agreed in the future, it is the highway authority that is ultimately liable. This is a matter of public law. It reflects the fact that the road in question is a ‘highway maintainable at the public expense’.

Future Implications

The Court’s ruling raises the question of whether local authorities can resultantly hold developers to ransom and whether Section 38 Agreements may become ineffective going forward. However, Lord Dyson MR noted: “I do not accept that…section 38 will become a dead letter. The benefits of Section 38 Agreements are well understood. They are of advantage to both developers and highway authorities”.

The judgment explains that Section 38 Agreements, provided they are sensibly negotiated, are a useful way to ensure both local authority and developer achieve their objectives. Hence, where an Agreement can be reached that is commercially and practically acceptable for both parties, they will most likely continue to be made. If developers cannot agree with the highway authority in question, different statutory machinery will have to be engaged. For example, a developer may use section 37 of the Act and have the road established as a highway maintainable at the public expense as of right.

The judgment means councils may require either payment of a commuted sum in respect of future up-keep or impose ongoing obligations on a developer to carry out maintenance works. For more information on the impact for future developments involving Section 38 Agreements, contact the Planning & Environment team.

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