Non-adoption of estate roads on modern housing estates

In recent years the media has been highlighting the inherent unfairness of householders on new housing estates paying for the upkeep of private roads whilst remaining liable to pay full Council Tax. The topic regularly comes up in the House of Commons where MPs recount the misery of constituents living with sub-standard or unfinished roads and yet subject to unregulated service charges.

So what’s gone wrong?

The Home Builders Federation (HBF) recently undertook a Freedom of Information exercise which revealed that on new housing developments of 10 or more units built during the last three years, only 10% have adopted roads, and just 3% of sewers, and 2% of Sustainable Drainage Systems (SuDS) have been adopted by the relevant water company. We will look at sewers another time: this article focuses on unadopted estate roads.

Private roads

A private or unadopted road is by definition a highway not maintainable at public expense. The local highway authority is under no obligation to pay for its maintenance and responsibility rests with the frontagers, the owners of properties which front onto private roads.

Adopted roads

The adoption process has been in place since the Highways Act 1959 came into force and was subsequently consolidated in the Highways Act 1980.

Agreements made under section 38 of the 1980 Act require new estate roads to be built to “adoptable standards”, i.e. to a standard where the highway authority is prepared to take over their maintenance. The developer undertakes the works; the highway authority inspects at certain stages and grants certificates; a maintenance period (usually 12 months) follows; the highway is inspected again and, if deemed satisfactory, it is adopted by the highways authority which maintains it in perpetuity.

The developer pays for the road construction, the maintenance period and any required remedial work up to the point of adoption. It provides a financial bond as security and the authority has a right to call in the bond for any asset or highway that has not been built to adoptable standards so it can then arrange for the work to be carried out by a third-party contractor approved by the authority. 

Why isn’t this happening?

The media invariably points the finger at developers who have been accused of establishing private management companies to collect service charges in order to create a new financial asset class to replace the infamous doubling ground rents in leasehold houses. These companies are in turn accused of escalating service charges for profit, whilst neglecting their maintenance obligations. 

This view oversimplifies the root causes of non-adoption. According to the HBF, developers overwhelmingly favour adoption and until relatively recently roads, open spaces and drainage systems on new housing estates were routinely adopted by the relevant local authority or utility provider. 

Budget cuts

Then came the austerity years and budgets cuts which prompted local authorities to find ways to avoid taking on new liabilities. As most road users will testify, highway authorities struggle to maintain existing roads so their reluctance to adopt new ones is unsurprising. 

Highway bonds

Even where local authorities are willing to adopt estate roads, developers have reported that highway bonds – the financial guarantee required by authorities to ensure the road is built to the agreed standard - have increased by up to 1,000% over the last seven years, whilst it can take up to two years to agree a highway agreement. 

Developers report that commuted sums – the financial contributions they make to highway authorities as compensation for their ongoing liability – have expanded to a point where adoption agreements require hundreds of thousands of pounds worth of sums. This makes it difficult for SME developers to arrange and secure a surety provider to support the adoption process.

Meanwhile, there are no common adoptable standards or pricing structures across different authorities. Inconsistencies create uncertainty for all developers and in particular SME developers who don’t carry the same level of capitalisation as larger developers. They are forced down the private management route as no developer wants to be left with small pockets of land to manage and maintain once they have developed out a site. 

Competition and Markets Agency Report 2024

The Competition and Markets Agency (CMA) carried out a market study into housebuilding in 2024. The study found that households subject to private management arrangements face considerable detriment in terms of the charges they pay, the quality of their estate roads and sewers, the potential for disproportionate sanctions to be applied for outstanding charges (see Estate rentcharges below), and the significant efforts required to hold management companies to account.

Estate rentcharges

Freehold estate service charges are also known as “estate rentcharges”. Rentcharges fell into disrepute following the well-reported case of Roberts v Lawton in 2016. 

In that case, the rentcharge owner - the person entitled to collect the rentcharge - had bought a portfolio of historic rentcharges (these are very different in nature to estate rentcharges) precisely in order to take advantage of a hitherto little-known piece of legislation that had long since outgrown its purpose.

Without express modification or exclusion of the remedies contained in the legislation, estate rentcharges come with the same draconian powers which operated so unfairly against the householders in Roberts. Since then, those remedies have been significantly curtailed in the case of new rentcharges but rentcharges which pre-date the Act remain unaffected, creating problems for house buyers who require a mortgage. Lenders invariably require management companies and developers to agree to remove the offending powers, or otherwise modify their effect, and whilst most are prepared to do so, a few dig their heels in, making it difficult for householders to sell houses on those estates.

The solution?

As part of the Autumn Budget 2025, and in response to the CMA’s study, the government has promised to consult on how to ensure that residents on privately managed estates in England can hold their estate managers to account. It will consider a variety of options for reform, including looking at the quality of private amenities, improved consumer protections and what amenities should be adopted by local authorities.

The CMA and the HBF support these principles but advocate wider reforms, including –

• Mandatory adoption of new estate roads, supported by common agreed and adoptable standards including design standards, timescales, bond and commuted sums framework,
• The creation of a nationally established pricing structure for inspections, and
• Defined developer payments.

For existing estates under private management, the HBF says householders should receive a reduction in Council Tax bills commensurate with or close to the level of private estate management charges. It believes that even a 10% discount in Council Tax would reduce concerns about two-tier local taxpayers and at the same time provide a financial incentive for local authorities to seek adoption of roads and amenities where they meet adoptable standards. 

Developers, particularly SMEs, need certainty and local authorities need funding. Leasehold and freehold reforms are high on this government’s agenda but the sheer number of proposed reforms under Leasehold and Freehold Reform Act 2024 makes it difficult to predict when this particular consultation will see the light of day or how far it will go towards implementing the above wish-list. Funding will, as always, be key to successful reform.

For more information about estate roads, please contact Brendan Cawley, Deborah Caldwell or a member of the New Homes Team.

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