Road & sewer bonds.
The bond the highways authority and water company demand before your roads and drainage can be adopted. It is also the one that quietly holds up plot sales when it's left to the last minute.
- Bond value
- 100% of works cost plus supervision fee
- Typical term
- Until adoption plus maintenance period
- Terms in
- 24 to 48 hours on a clean case
- Alternative to
- Cash deposit or bank guarantee
Security that the works get finished.
Under a section 38 agreement with the local highways authority, or a section 104 agreement with the water and sewerage undertaker, a developer promises to build estate roads and drainage to adoptable standard. The authority wants security that the work will be completed even if the developer doesn't complete it.
A surety bond is that security. It sits alongside the agreement, typically at 100% of the estimated cost of the works plus a supervision fee, and is released once the works are adopted after the maintenance period.
The alternative is a cash deposit or a bank guarantee against your facility. A surety bond leaves the cash and the facility where they're useful: in the build.
Where developers get caught out.
Leaving it until the plots are sold
The bond has to be in place before the authority will let you connect and adopt, and conveyancers won't complete without it. Two weeks' notice turns a routine placement into a scramble.
Assuming the bank is cheaper
A bank guarantee ties up facility you'd rather spend on the build, and is usually secured. A surety bond is unsecured insurer capacity and often costs less once you price the opportunity cost.
Underestimating the works cost
Bonds are set on the engineer's estimate. If the estimate is light the authority will ask for a top-up bond later, at a worse rate. We'd rather size it correctly once.