Section Agreements, Highway Act or Road Bond
What is a Section Agreements, Highway Act or Road Bond?
A Section Agreement Bond commonly referred to as a Highways Act Bond or Road Bond is a type of surety bond required by local authorities in the UK when a developer or contractor is building or modifying roads, footpaths, or drainage systems that will eventually be adopted by the council or utility provider.
A Section Agreement / Road Bond protects councils and the public by ensuring roads, paths, drainage, and related infrastructure are properly completed before being adopted. It’s a crucial part of many residential and commercial developments, especially when infrastructure needs to be adopted by public bodies.
What is a Bond?
Placing your first bond? Or just need a refresher? Read on for the what’s what of surety bonds.
Surety protects a business from financial losses, usually caused when one party fails to fulfil their end of a contract. By placing a surety (usually in the form of a bond), a business makes sure that all the project bills will be paid on time should there be any disruptions or problems fulfilling the contract.
Principal
The Principal is the business placing the bond. They are making a promise to the Obligee. To them, the Surety bond is like insurance.
Surety
The Surety promises to pay the Obligee should the Principal not do as they promise.
Obligee
The Obligee is the party that requests the bond from the Principal.
When might a Section Bond be required?
These bonds are typically linked to legal agreements under the Highways Act 1980, including:
- Section 38 Agreement – For new roads to be adopted by the local authority
- Section 278 Agreement – For changes or improvements to existing public highways
- Section 104 Agreement (under the Water Industry Act 1991) – For new sewerage infrastructure to be adopted by the local water authority
The bond guarantees that the developer will:
- Complete the infrastructure works to the required standard
- Do so within the agreed timeframe
- Cover any remedial works if necessary
If the developer fails to fulfil their obligations, the local authority can call on the bond to fund the completion or repair of the works.
Can PS Surety help?
PS Surety is a dedicated surety bond brokerage and we would be delighted to assist any contractor with placing performance bonds. We are fully regulated by the FCA and we guarantee that we provide our clients with:
The best possible terms available in the market
An honest, open and joint approach to our client’s Surety needs
Detailed client dashboard providing information on every bond ever placed
Communication when bonds become overdue
A single touch point within our organisation for wording reviews, quotes and queries
Rapid responses
That sounds expensive!
Our service is completely free to contractors. We are paid a commission by the surety providers on each bond that we place with them on behalf of our clients, the details of which are fully disclosed in our client dashboard.
The surety providers are happy to pay our commission because we specialise in bringing them business which fits their ever changing underwriting criteria. We also deal with frequent queries, wording issues, bond drafting and general administration.
The price that you pay PS Surety for a bond is the same price that you would pay any Surety if going direct.
Frequently Asked Questions – Section Agreements, Highway Act or Road Bonds
What is a Section Agreement or Road Bond?
A Section Agreement or Road Bond is a type of surety bond required by a local authority under the Highways Act 1980. It ensures that a developer completes highway-related works—such as roads, footpaths, and street lighting—according to the council’s standards and within an agreed timeframe.
When is a Road Bond required?
A Road Bond is typically required when a developer is carrying out works that will later be adopted by the local authority. This often includes:
- New residential or commercial developments
- Infrastructure projects involving public access roads
- Modifications to existing highways
What’s the difference between a Section 38, Section 278, and Section 184 Agreement?
- Section 38: For new roads intended for adoption by the local authority
- Section 278: For improvements to existing public highways (e.g. new junctions, roundabouts)
- Section 184: For temporary access works or crossings over footpaths and verges
Each type requires a bond to guarantee the works will be completed to the required standard.
Who benefits from the bond?
The local authority is the beneficiary. The bond ensures that, if the developer fails to complete the work as agreed, the authority has access to funds to complete the works without financial loss to the public.
What is the typical bond amount?
The bond amount is usually based on the estimated cost of the works, plus a margin (often 10–25%) to account for risk or future inflation. The local authority sets this amount.
How long does the bond remain in place?
The bond stays in force until the local authority is satisfied that all works have been completed to standard, including any defect rectifications during a maintenance period (often 12–24 months).
Can I avoid tying up capital for the bond?
Yes. By using a surety bond rather than a cash deposit or bank guarantee, you preserve liquidity and working capital. Surety bonds are a more efficient form of security for many developers.
How do I apply for a Road Bond?
Contact PSS. We’ll guide you through the process, liaise with your local authority, and source competitive terms from our network of A-rated sureties. We’ll ensure the bond wording and terms align with your project and local authority requirements.
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