Council victory brings risk of increased costs for developers

Posted on
Following a recent Court of Appeal judgment, developers may come under increased pressure from highway authorities to contribute towards the costs of maintaining estate roads and street furniture after they have been adopted as maintainable at public expense under Section 38 of the Highways Act.

The developer in the case had been granted outline planning consent to develop an estate of 525 dwellings in a suburb of Liverpool, and this necessitated a good deal of infrastructure for which agreements with the local authority and various utility suppliers had to be entered into, including a Section 38 agreement relating to the construction, maintenance, and adoption of the roads.

The highway authority refused to enter into the agreement unless the developer accepted an obligation to pay over a commuted sum of money in respect of post-adoption maintenance costs, so the case turned on whether use of the word "maintenance" in the Section is restricted to maintenance of the roads (or street lighting to be more precise about the case itself) before adoption or can include a period after adoption, i.e. when they are statutorily maintainable at public expense.

Counsel for the developer and the highway authority (both QCs in view of the importance of the judgment for all substantial developments around the country) made clever but predictably slanted analyses of the Section, but both the High Court and the Court of Appeal ruled that the Council's interpretation was correct, namely that the amount that can be demanded for maintenance of the highway is not temporally constrained.

The commuted sum in the case was relatively small in the context of the development in question, just under £40,000, but the judgment means that developers can expect to be asked for contributions to post-adoption maintenance costs for roads as well as street lighting, and will have to factor such sums into their development appraisals. Indeed, there was a suggestion during the hearing that some developers and highway authorities may already be including post-adoption maintenance costs in section 38 agreements, and this is the first time that it was being resisted by the developer and so fell to be judicially decided.

In any event, there is only so much that a developer can be required to pay before a given development becomes uneconomic, which means that there will always be a natural limit to the demands that can be made by the authorities.

Redrow Homes Ltd. vs. Knowsley Metropolitan Borough Council 2014 EWCA Civ 1433