Advanced payment codes – why should you be aware of them in respect of new developments?

Posted: 04/08/2023

Advanced payment codes (APCs) are pursuant to the Highways Act 1980 and ensure payment of the cost of a private street in the event of its non-completion, so that it can be finished by the street authority at the expense of the developer. As explained below, non-compliance with the legislation on APCs is a criminal offence and, therefore, it must be given proper consideration on new developments.

How will I find out about an APC?

Under section 220 of the Highways Act 1980, the street authority is required to serve a notice within six weeks of any plans for the erection of a new building being deposited for building regulations. The notice is to include a sum for cases where the street authority has to carry out the street works itself. The body undertaking the development will therefore be informed about the notice, as it will be served on them while a party acquiring units from a developer will be able to find out about it as the APC will be registered as a local land charge against the property and revealed by a local search.

What is the process for complying with an APC?

Once a notice has been served pursuant to an APC, then no work can be done on new buildings adjoining the land subject to the APC, until payment of the sum required has been made to the street authority. Under section 219 of the Highways Act 1980, subsection 4, part d), works can, however, start if a section 38 agreement has been entered into. There are further ways round an APC listed in subsection 4, but these are the usual ways for dealing with one. It is recommended to seek legal advice on the other exceptions if they apply on matters.

How can this be an issue for a developer constructing new units?

Under subsection 2 of section 219 of the Highways Act 1980, it is an offence for the party to carry out works on any building adjoining a street that is subject to an APC that has not been dealt with as above. This offence results in a fine (up to £1,000) for each building, and any further contravention will lead to an additional fine. Therefore, on a 300-unit development with roads subject to an APC, the developer could be incurring a £300,000 fine on only one notified contravention. There is also potential reputational damage to the company carrying this out and a loss in relationship with the street authority.

What can be done by a developer?

This is as simple as complying with the requirements of the APC as set out above and not starting work on the buildings until that is done.

How can this be an issue for a registered provider acquiring new units?

This is an issue where units are acquired during construction (eg golden brick). Under subsection 2 of section 219 of the Highways Act 1980, it is an offence for the party owning the land that units are being constructed on subject to an APC which has not been dealt with as above. As the units are still being constructed when purchased by the registered provider, they are guilty of the offence the moment further works occur, even though they are not undertaking them.

This offence carries with it a fine (up to £1,000) for each building, and any further contravention is subject to an additional fine. As above, there is also a risk of loss to reputation and relationships together with the issue of an offence under the Proceeds of Crime Act 2002.

What can be done by a registered provider?

The first thing that can be done to deal with this issue is to seek compliance with the APC prior to entering into a contract with the developer. It is worth noting that a viable defence can be if an owner of one of the buildings being constructed has reasonable grounds to believe that the APC has been complied with - so if the developer deceives the registered provider on this point, it could be used as a defence.

The next thing that can be done is to make sure that the units will not be acquired until after they have been completely built, as then the registered provider will not be the owner during the construction of the units and will therefore not commit an offence (eg change from a golden brick structure to a turnkey structure). There is still potentially a proceeds of crime issue on this solution.

The third option is to make a golden brick completion conditional on compliance with the APC; if the APC has been complied with, then there can be no breach by the registered provider. When golden brick is then reached, it is important to remember not to waive this condition.

Summary

While APC legislation has clearly not been followed by developers and street authorities in the past, this does not mean it will continue to be the case. It is therefore important to review practice in this area and ensure compliance. 

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