Some may say that publishing the Commencement Regulations for the new Electronic Communications Code (‘new Code’) on 15 December 2017 so that the new Code will become law on 28 December 2017 is sneaky for the dog days of Christmas. While we could not possible comment on that, here is a reminder of what the new Code is and what the key changes for property owners are.
The Code – a history
The old Electronic Communications Code (‘old Code’) in the Telecommunications Act 1984, formerly known as the Telecommunications Code, gave telephone companies a statutory right to install and maintain landline equipment on another’s land. New forms of digital technology led to the amendment of the old Code, by the Communications Act 2003.
The new Code is found in schedule 1 of the Digital Economy Act 2017 (‘DEA 2017’), and replaces the old Code, subject to the transitional provisions found in schedule 2 of the DEA 2017.
The Code Rights
The new Code provides operators with the right to install and keep installed (and to inspect, maintain, adjust, alter, repair, upgrade and operate) electronic communications apparatus (including masts, cables, cabinets, ducts, antennae and telegraph poles) on, under or over another’s land, for the purposes of providing the operator’s network or providing an infrastructure system.
The key changes for property owners include:
Compensation payable for the imposition of the Code rights is calculated on the market value of the Code agreement, and is assessed on the basis of a “no scheme” valuation. This excludes any value attributable to network use. It assumes that the transaction does not relate to the provision or use of an electronic communications network(!) and that there is more than one site which the operator could use for these purposes. It contemplates that there are other possible uses to which the site could be put, which in the case of antennae on a roof space or a cabinet in a corner of a field could be limited.
This means that property owners will (generally) be receiving lower rents from the operators than they currently do under the old Code, aligning the compensation with the rents payable by other utility providers (electricity, water, gas), which is the Government’s intention to equate the rights to other infrastructure.
• Assignment, Upgrading and Sharing of Apparatus
Operators have new rights to assign Code agreements and upgrade and share apparatus with other operators.
The freedom to assign Code agreements will deprive property owners of the option of negotiating new agreement terms with a new operator and/or charging a new operator an increased rent. This freedom is not entirely absolute in that the property owner can require the operator to enter into a form of authorised guarantee agreement, by which the outgoing operator guarantees the incoming operator’s obligations. This will not protect the property owner on further assignments.
The automatic right for an operator to upgrade its apparatus or share its apparatus with another operator could also deprive property owners of additional income, and will further reduce the property owner’s control. Two conditions must be satisfied; any changes as a result of the upgrading or sharing must have no adverse visual impact, or no more than a minimal adverse visual impact, nor impose any additional burden. It is not clear how meaningful this test will be.
• Termination of Agreement and Removal of Apparatus
The procedure for termination under part 5 of the new Code requires giving notice of termination to the operator at least eighteen months before the date specified for termination. The notice must state the grounds on which it is being given. The statutory grounds are substantial breach by the operator, persistent delay by the operator in making payments, intention to redevelop and that the test for imposing the Code agreement is not satisfied. The operator has three months to give a counter-notice and then apply for a court order within three months of the service of the counter-notice. Depending on whether or not any of the grounds are established, the court may order termination, continuation, modification or renewal of the Code agreement.
If the Code agreement is terminated, the property owner then has to comply with the “removal of apparatus procedure” under part 6 of the new Code. This requires giving notice to the operator specifying a reasonable period to remove the apparatus. In the absence of agreement the property owner may need to enforce removal of the apparatus with a court order.
Recovering land from an operator will be a lengthy process, causing delays for a property owner in obtaining vacant possession. This may frustrate developers. Preparation and longer lead times will be necessary for any redevelopment plans.
• Security of Tenure
Under the new Code, operators will no longer have security of tenure afforded by Part 2 of the Landlord and Tenant Act 1954 (‘1954 Act’). Leases with the primary purpose of granting Code rights are excluded (paragraph 4, schedule 3, DEA 2017). The potential overlap between the 1954 Act and the old Code caused uncertainty and gave two layers of protection for operators with leases that were not contracted out. This no longer applies.
However, there is no definition of “primary purpose” which may lead to disputes, and as outlined above, recovery of possession under the new Code is a lengthy two stage process.
• Subsisting Agreements
The transitional provisions in schedule 2 of the DEA 2017 apply to old Code agreements, so that a subsisting agreement has effect as an agreement under part 2 of the new Code, subject to modifications including:
• limitation of rights to those contained in paragraphs 2 and 3 of the old Code;
• exclusion of the new assignment, upgrading and sharing provisions, meaning that assignment, upgrading and sharing will only apply if included in the subsisting agreement and on the terms as drafted;
• exclusion of the termination provisions where either the subsisting agreement is a lease to which the 1954 Act applies with no agreement to contract it out or where the subsisting agreement is a lease the primary purpose of which is not to grant Code rights and the lease is contracted out.