The council must be protected against the risk of unforeseen expenditure if the works are unfinished for any reason. A Section 38 or Section 278 Agreement is supported by a bond or cash deposit (default cost) calculated by the Highway Authority and based on the cost of the works proposed. This bond or cash deposit can be called upon if the developer goes into liquidation or otherwise defaults on his responsibilities.
The Developer must provide surety equal to the default cost. This may be in the form of:
- A bond with an approved financial institution; or
- The equivalent sum of monies lodged with the Council.
- An underwriting by the National Housing Building Council.
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