Bob Smytherman: Could This Be The Next Big Scandal Facing Leaseholders?
Bob Smytherman is Chairman of the Federation of Private Residents Association and has been tirelessly campaigning for the rights of leaseholders for over 20 years. In this opinion piece he takes a look the Section 38 Highway Agreements (road adoption) and the very real possibility of leasehold (and possibly freehold) home owners being compelled to pay for road maintenance in addition to paying their Council Tax.
Section 38 of the Highways Act 1980 enables the Highway Authority to agree to adopt roads constructed by developers so that they can be maintained at public expense through the Council Tax Bills.
The agreement process allows County or Unitary Councils to review the details of developer-promoted developments to ensure that the design and construction of highway improvement schemes and new roads being offered for adoption as public highway comply with the appropriate standards.
Developers have the choice whether to offer their roads for adoption; County Council cannot force them to do so. Developers may not enter into Section 38 Agreements for a variety of reasons: for example, customers want to live on private estates, property prices can be fixed at a lower level, or engineering difficulties may mean that the specific requirements cannot be met.
Where roads are not adopted, a developer would usually set up a management company and the residents would be required to contribute towards the maintenance of the road.
This essentially means that leasehold (and possibly freehold) home owners will have to pay for road maintenance in addition to paying their Council Tax.
Refusal To Adopt
Highways Authorities can refuse to adopt any new roads on any developments; planning and legal officers will need to ensure that this position is made clear in any discussions with developers and later to convincing solicitors.
Given the squeeze on local Government finances will this be a default position for many Councils?
Highway Authorities could continue to adopt roads where it can be demonstrated that they serve sufficient utility to the public to justify being maintained at public expense and that they have been designed and constructed to an appropriate standard. In general, this means that any roads offered for adoption need to serve more than five units. What about estates of leasehold flats though?
Will Highway Authorities tie their hands to a specific policy on highway agreements? I doubt it.
Objectives should be delivered by:
- Checking the design and construction of developer-promoted highway schemes and new roads constructed by developers to ensure that highway infrastructure meets national and local design standards and specifications;
- Checking the safety of developer-promoted designs by ensuring that they are safety audited in accordance with County Council policy; and
- Ensuring that developer-promoted highway structures or structures adjacent to the highway have been designed and constructed to the appropriate standards.
Section 38 Process: Done On The Cheap?
The developer is required to employ a competent designer to design the roads, drainage and associated infrastructure. Will this be done on the cheap to get a swift sale of leasehold flats?
Highways Authorities must review the design and specification to ensure that it accords with standards/planning requirements and provision should be made for highway drainage (drainage must be designed to a specific standard and a separate agreement put in place with the Sewerage Authority).
How many blocks only find out whether this has been done years later following a problem or flood?
During construction, Highway Inspectors monitor sites to ensure compliance with design/specification. This is to ensure that the infrastructure will be fit for purpose and will not result in long-term maintenance problems.
Will the same robust process be carried out by developers when they know the Freehold will be sold upon completion only for the problems to be discovered later by a management company who had not been involved in the process of planning the roads?
Developers pay a fee to the Highway Authority to cover the cost of reviewing designs and inspecting the works. As profit margins are squeezed will developers opt for a private estate to be maintained by future service charge payers who have little idea of what has gone on during construction?
Developers must be required to provide bonds equivalent to the cost of the works to ensure that the works are completed.
How many Highway Authorities will do this when they know they have will no responsibilities for future maintenance on the roads where the flats are built as these will be passed on as a condition of the lease to future leaseholders? How many solicitors will make prospective leaseholders aware of this future liability when dealing with the sale of new properties?
I think the lesson from this and any issue relating to leasehold property is to ‘always read the lease’, use a competent solicitor when considering purchasing a flat on an estate with roadways and ask questions about future liability of management costs to maintain the road networks around your development.
Remember if it sounds too cheap then it is probably because the solicitor is not a specialist in residential leasehold property.