The Digital Economy act 2017 introduced a new Electronic Communications Code to make it easier for network operators to install and maintain apparatus, such as radio masts, on public and private land.
Almost two years later you would expect some clarity on how the code would work in practice and new agreements being put in place to progress the Government’s objectives of better mobile connectivity, but the reverse has been the case.
Deployment of new sites and lease renewals have almost completely stalled.
The code introduced new provisions and it will take time for all parties to adjust to these changes. One of the most controversial aspects of the new code has been the revised assessment of the rent, now called site payment. Whereas previously this was a market rent it is now assessed on the combination of a consideration and compensation payment.
Operators are assessing the site payment based on the underlying value of the land by taking an equivalent rental return from a whole farm and then apportioning a pro rata payment to the – relatively small – site area required.
There have been no definitive tribunal cases to give clarity on the correct level of any site payment but the Upper tribunal case of CTIL v Compton Beauchamp Estates made comments on the assessment of a green field site payment. The Tribunal confirmed that it was unconvinced by the operator’s pro rata site payment assessment, commenting that “this exercise inevitably results in a tiny sum when converted to a leasehold annual figure”.
However, this is still the approach we are seeing from many operators before they offer an additional small uplift to try to obtain an agreement. It is these site payment offers that are causing the most resistance and resentment from landowners to new sites.
Landowners are being approached by operators requesting new leases and lease renewals. These approaches for a consensual agreement can appear quite aggressive with the operator often threatening the use of code powers if agreement cannot be reached.
The terms proposed by the operators often give them more rights than are granted by the code and limit their liabilities while confirming their proposals are in line with the code.
Whereas the parties cannot contract out of the code and additional rights can be granted, some approaches make these additional rights look like standard provisions of the code rather than being of additional benefit to the operator.
In practice it is possible to achieve a negotiated code agreement which grants the operator the powers they need but also significantly protects the landowner’s position. However, negotiations stall over the site payment that is being offered, which in most cases is seen as being well below the figures that the landowner considers reasonable for the rights to be granted.
Due to the level of site payment offered, landowners often now look to resist having a telecommunication mast on their land whereas previously they generally welcomed them for the additional income and coverage they provided.
A landowner can bring a code agreement to an end if he intends to redevelop all or part of the land to which the code agreement relates or any neighbouring land and couldn’t reasonably do so unless the code agreement comes to an end.
The Upper Tribunal case of EE Limited and Hutchison 3G UK Limited v the trustees of the Meyrick Estate Management trust considered this issue where the Meyrick Estate was proposing to erect its own mast for estate broadband coverage and proposed the operators should share the mast.
The Tribunal found that the Meyrick Estate’s plans were conceived in order to defeat the operators’ claims for code rights being implemented rather than having a viable development scheme. Therefore, for a landlord to terminate a code agreement in this way the development plans must be genuine and not linked to the application for code powers by the operator or be an attempt to frustrate the implementation of code powers.
The reasonable professional fees incurred by a landowner for progressing a code agreement should be payable by the telecoms operators so anyone affected by a new code approach or lease renewal should obtain professional advice on the terms and implications of any agreement.
Cracking the code
Whereas we expect further tribunal cases later this year, the key to cracking the code is an appropriate level of site payment. Once this has been agreed the market will start to move again, bringing increased connectivity to the UK. But compromise will be required from both sides in order to find a way forward.