Business

Developer claims stinking sewer bond costs stymie house-building

Developers have to pay a bond to ensure sewers are completed to an appropriate standard for adoption by NI Water
Gary McDonald Business Editor

SEWER bond charges in Northern Ireland "simply stink" and are severely curtailing house-building, a leading developer has claimed.

And he has challenged NI Water to "come clean" on how it calculates the costs of the mandatory bonds, which are the highest in the UK and as much as four times those in England.

A sewer bond is a surety provided on behalf of a property developer or house-builder to ensure sewers are completed to an appropriate standard for adoption by NI Water should the developer become insolvent or does not complete the pipework to the utility company's strict specifications.

But Jamesy Hagan, managing director of Ballyclare-based Hagan Homes, one of the north's largest home-builders (last year its sales were around the £20m mark), insists the costs are "excessive" and believes it is contributing to the shortage of new homes in the region.

He said: “The sewer bond is an essential component of the sewer adoption process and something that is vitally important to protect the consumer.

"But our major concern is that in Northern Ireland this bond is 40 per cent of the cost of the construction of the sewers, compared to just 10 per cent in England.

“Why is Northern Ireland Water is charging this higher bond percentage? It has steadfastly refused to disclose its method of calculating the costs of the sewer bonds and its estimates are often many times the actual cost of construction.”

Mr Hagan believes that this excessive estimate and rate is contributing to the shortage of new homes in Northern Ireland.

“Developers currently have the majority of their working capital tied up in these sewer bonds. Indeed many developers are simply unable to obtain these bonds due to their excessively high costs. From my own personal experience Hagan Homes currently has approximately £2 million tied up in sewer bonds.

“If NI Water were to reduce the rate that was charged this would in turn release the necessary funds for developers to invest in new land and developments and thereby significantly address the new home shortage in Northern Ireland.”

He added: “Excessive sewer bond rates are also a massive barrier for the smaller builder/developer entering the local market.

"While NI Water enjoys a monopoly position in Northern Ireland, it is vital that the Utility Regulator steps in to prevent this abuse of the bond arrangements and provides the small and medium builders here a level playing field with those in England.”

A spokesman for NI Water told the Irish News: "Bond securities are ultimately in place to protect the customer, particularly those who are purchasing new build homes.

"These bond ensure developers have enough financial cover to fulfil their obligations to complete sewer connections to the required standard.

"The bond securities are based on a percentage of the estimated cost of the works, and are comparable with other UK water companies."

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