Description: Section 38 bonds | Nationwide Sureties have arranged over £200 million worth of Performance Bonds and Construction Bond guarantees.
A Section 38 agreement is a contractual agreement between a developer and a local authority or water authority that ensures the satisfactory completion of a new road or sewer system before it is adopted by the relevant authority. It serves as a guarantee that the developer will construct or repair the road or sewer to the required standards.
Under a Section 38 agreement, the developer agrees to provide a bond or cash collateral equal to the value of the road or sewer works. This bond or collateral covers the roadway or sewer until the end of the Making Good of Defects period, during which any necessary repairs or corrections must be made by the developer. Once the defects period ends and the road or sewer is deemed to be in satisfactory condition, the relevant authority assumes responsibility for its maintenance and upkeep.
The purpose of the Section 38 agreement is to protect the local authority or water authority from potential financial burdens if the developer fails to meet the required standards or if additional costs arise during construction or repairs. The bond or cash collateral provides a form of security for the authority, ensuring that funds are available to cover any necessary works in case the developer is unable to fulfill their obligations.