Section 38 vs Section 278: What Developers Need to Know

Highway agreements are one of those topics that developers encounter on almost every project but rarely understand in detail until something goes wrong. Two agreements in particular — Section 38 and Section 278 — cause persistent confusion because they both involve the local highway authority, both require legal agreements and financial bonds, and both relate to roads. But they serve fundamentally different purposes, and getting them mixed up can delay your project by months.

This article explains the difference, when each applies, and what the process looks like in practice.

What Is a Section 38 Agreement?

A Section 38 agreement is made under Section 38 of the Highways Act 1980. It is the mechanism by which a new road — built by the developer as part of a development — is adopted by the local highway authority as a publicly maintainable highway.

In plain terms: you build a new road within your development, and the council agrees to take it on and maintain it in perpetuity. Without a Section 38 agreement, the road remains private, which means the developer (or a management company, or the residents) is responsible for its upkeep indefinitely.

Section 38 agreements apply when the development creates new roads that need to be adopted. This is the typical scenario on residential estates, where the internal road layout serves the new houses and needs to become part of the public highway network.

What Triggers a Section 38?

A Section 38 agreement is triggered when:

• The development includes new roads intended for adoption.
• The local planning authority or highway authority requires adoption as a condition of planning consent.
• The developer chooses to have the roads adopted rather than managed privately.

It is worth noting that there is no automatic right to have a road adopted. The highway authority must agree, and the road must be built to adoptable standards — which are typically set out in the authority’s design guide or the Design Manual for Roads and Bridges (DMRB), depending on the road classification.

The Section 38 Process

The process broadly follows these steps:

1. Pre-application discussions: Early engagement with the highway authority is essential. They will want to see the road layout, construction details, and drainage design before they agree to adopt.
2. Technical approval: The developer submits detailed engineering drawings (road construction, kerbing, footways, lighting, drainage) for approval by the highway authority. This can take several months, particularly if the authority has a backlog or requests design changes.
3. Legal agreement and bond: Once the technical details are approved, the Section 38 agreement is drafted. The developer must provide a financial bond — typically 150% of the estimated construction cost — which the authority can call upon if the developer fails to complete the works to the required standard.
4. Construction: The road is built under the supervision of the highway authority’s inspector, who will carry out periodic inspections during construction and a final inspection upon completion.
5. Maintenance period: After construction is complete and the final inspection is passed, the road enters a maintenance period — usually 12 months — during which the developer is responsible for any defects. The bond is typically reduced to a maintenance bond (often 10-20% of the original) during this period.
6. Adoption: At the end of the maintenance period, assuming the road is in satisfactory condition, the highway authority formally adopts it. The bond is released, and the authority assumes responsibility for ongoing maintenance.

Typical Timelines

From initial submission to adoption, the entire Section 38 process typically takes two to three years. Technical approval alone can take six to twelve months, depending on the authority. The legal agreement can take a further three to six months to negotiate and execute. Add the construction period and the 12-month maintenance period, and it becomes clear why early engagement is critical.

What Is a Section 278 Agreement?

A Section 278 agreement is made under Section 278 of the Highways Act 1980. It allows a developer to carry out works on an existing public highway — modifications, improvements, or new accesses — at the developer’s expense.

The key distinction is that a Section 278 agreement relates to works on an existing highway, not the construction of a new road. If your development requires a new junction, a right-turn lane, traffic signals, pedestrian crossings, road widening, or any other modification to the existing highway network, a Section 278 agreement is the mechanism that authorises those works.

What Triggers a Section 278?

A Section 278 agreement is triggered when:

• The development requires a new vehicular or pedestrian access from the existing highway.
• The highway authority or planning conditions require improvements to the existing road network — such as junction improvements, visibility splays, speed reduction measures, or pedestrian crossings.
• The development generates sufficient traffic to require mitigation works on the surrounding highway network, as identified through a Transport Assessment.

In most cases, the requirement for Section 278 works will be established during the planning process, either through pre-application discussions with the highway authority or through conditions attached to the planning consent. The specific works are often informed by a Transport Assessment and, where relevant, the findings of a Road Safety Audit.

The Section 278 Process

The process is broadly similar to Section 38 but with some important differences:

1. Scope agreement: The developer and highway authority agree the scope of works required. This is usually established during the planning process.
2. Design and technical approval: The developer’s engineer designs the highway works and submits them to the authority for technical approval. Because the works are on an existing public highway, the design standards are typically more prescriptive than for a new estate road. Departures from standard require explicit approval.
3. Road Safety Audit: For most Section 278 works, a Stage 1 Road Safety Audit (and often a Stage 2) will be required before the design is approved. This is an independent assessment of the design for potential road safety issues.
4. Legal agreement and bond: As with Section 38, a legal agreement is drafted and a financial bond is required. The bond amount varies but is typically 150% of the estimated works cost.
5. Construction: The works are carried out by the developer’s approved contractor, under the supervision of the highway authority. Because the works are on a live highway, traffic management plans and temporary traffic orders may be required, adding complexity and cost.
6. Inspection and sign-off: The highway authority inspects the completed works and, if satisfied, signs them off. There is typically a 12-month maintenance period during which the developer is liable for defects.

Typical Timelines

Section 278 agreements are generally quicker than Section 38 because the scope of works is usually smaller. However, the technical approval and legal agreement stages can still take six to twelve months. Working on a live highway also introduces constraints on construction timing — some authorities restrict highway works during peak hours, winter months, or around school terms.

When Do You Need Both?

Many developments require both a Section 38 and a Section 278 agreement. A typical example is a new residential estate that includes new internal roads (Section 38) and a new junction onto the existing highway (Section 278). In these cases, the two agreements are usually progressed in parallel, though they are separate legal instruments with separate bonds.

It is not uncommon for the Section 278 works to be a prerequisite for occupation — meaning the new junction must be completed before the first residents can move in — while the Section 38 adoption process continues well beyond the completion of the last house.

The Bond and Surety Process

The financial bond is often the most contentious aspect of both agreements. The bond protects the highway authority against the risk that the developer fails to complete the works (or completes them to an inadequate standard), leaving the authority to step in and finish or rectify them.

Bonds are typically provided as:

• Cash deposits: The simplest form, but it ties up significant capital.
• Surety bonds: Issued by an approved surety company or insurance provider. This is the most common route for larger developers.
• Bank bonds: A letter of credit or guarantee from the developer’s bank.

The bond amount — usually 150% of the estimated construction cost — is calculated by the highway authority based on the submitted engineering drawings and specifications. The 50% premium provides a contingency to cover the authority’s costs if it has to step in, which are invariably higher than the developer’s costs due to procurement and project management overheads.

One practical point: the bond must be in place before the legal agreement can be executed, and the agreement must be executed before works can commence. Delays in arranging the bond are a common cause of programme slippage. Start the process early.

Common Pitfalls

Not engaging early enough. Highway authorities are not known for speed. Early engagement — ideally at pre-application stage — gives the authority time to consider your proposals and reduces the risk of surprises at detailed design stage. Submitting a fully developed scheme for technical approval without prior discussion is a recipe for delays.

Underestimating the legal process. The legal agreement itself can take months to negotiate, particularly if the developer’s solicitor is unfamiliar with highway agreements. Use a solicitor with specific experience of Section 38 and Section 278 agreements — they will know the standard clauses and the points that are genuinely negotiable.

Ignoring commuted sums. Some highway authorities charge a commuted sum — a lump-sum payment to cover the future maintenance cost of adopted features such as street lighting, SuDS features, or landscaping within the highway boundary. These sums can be substantial and are often not identified until late in the process. Ask about commuted sums at the outset.

Assuming private roads are simpler. Developers sometimes decide to keep estate roads private to avoid the Section 38 process. This can work, but it creates long-term liabilities: someone has to maintain the road, and a management company arrangement must be established. Private roads can also make it harder to sell properties, as mortgage lenders may have concerns about unmade or unadopted roads.

How We Can Help

At Aegaea, our highways and infrastructure team handles the full Section 38 and Section 278 process, from initial scoping and design through to technical approval, bond arrangement, and construction supervision. We work with local highway authorities across England and Scotland, and we understand their individual requirements and preferred approaches.

If you are at the early stages of a development and need advice on which highway agreements will be required, or if you are already in the process and need support with the technical submissions, get in touch. Early advice on highway agreements can save months on your programme.