Most developers construct new roads with the intention that they will become public highways maintainable at the public expense. This is usually achieved by entering into an agreement under section 38 of the Highways Act 1980, which enables local highway authorities to adopt roads if they have been constructed to a specified standard.
Until recently, developers and highway authorities have generally worked on the basis that a developer’s liability for roads that are to be adopted ceases at the point of adoption. However, R (on the application of Redrow Homes Ltd v Knowsley Metropolitan Borough Council [2014] EWCA Civ 1433; [2014] PLSCS 299 confirms that section 38 agreements can contain provisions for the payment of sums to cover all aspects of future maintenance of highways into the indefinite future (or a provision that the developer shall itself pay for – or even carry out – future maintenance, when necessary).
The case concerned the adoption of estate roads serving a development on land near Liverpool. Both parties wanted the roads to be adopted, but the council refused to enter into an adoption agreement unless the developer agreed to pay a capital sum to cover the cost of future maintenance of the street lights.
The council pointed to section 38(6), which 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, road, bridge or viaduct to which the agreement relates and other relevant matters as the authority making the agreement think fit”. The trial judge upheld the council’s interpretation of section 38(6), and ruled that the requirement was lawful.
The Court of Appeal has agreed with the decision despite the developer’s arguments that this would contradict the function of section 38 agreements, which turn private roads into public highways maintainable at the public expense. It ruled that section 38(6) is expressed in unqualified terms, which could hardly be wider in scope, and that there was nothing in its language to distinguish between periods before, and after, a road becomes maintainable at public expense.
The court observed that the phrase “maintainable at the public expense” does not indicate how highway authorities are required to discharge their responsibilities. They can maintain the road themselves, or ask the developer to do so. They can pay for the cost out of public funds, or obtain funds from the developer, or use a combination of these alternatives. Whatever they decide, they remain liable and, if a developer agrees to maintain a highway and then defaults on its obligations, the highway authority remains liable – precisely because the highway is maintainable at the public expense.
Does this mean that local authorities will be able to hold developers to ransom in future, or that section 38 agreements will become a “dead letter”? The court thought not. It took the view that developers will not enter into section 38 agreements unless the deal on offer is commercially acceptable and, if not, can use different statutory machinery to achieve their objects. The advantages of section 38 agreements are well understood. They benefit both developers and highway authorities. Consequently, the court believed that parties will usually negotiate sensibly and that section 38 agreements will continue to be made.
Allyson Colby is a property law consultant
