Since the new Electronic Communications Code (“the Code”) came into force on 28 December 2017, a number of cases have been heard by the Upper Tribunal (Lands Chamber) (“the Tribunal”). The Code will directly impact Local Authorities which already have telecoms masts, dishes and other associated apparatus on their land or who control land such as high rise residential flats and brownfield or greenfield sites where telecoms masts could in future be sited.
To date, Tribunal decisions have gone more in favour of telecoms operators than local authorities. We look at one case in detail which demonstrates how the new Code is adversely impacting upon the rent levels that local authorities can now command.
The Law – New Code and the “No-Network Assumption”
The new Code found at Schedule 3A of the Communications Act 2003, governs how telecoms operators, both mobile phone network providers and broadband providers (“Operators”), can acquire and exercise new rights to install and then keep electronic communications apparatus (“ECA”) on, under or over land.
There are nine separate categories of rights which an Operator can ask for, known as “Code Rights”. These include:
- the right to access land for a site inspection to ascertain if the land is suitable as an ECA site;
- the right to come onto land (including roof tops) to carry out works to install ECA;
- the right to maintain, repair and upgrade the ECA; and
- the right to interfere with or obstruct access routes to the land.
Under paragraph 20 of the Code, an Operator can serve a written notice (known as a Code Notice) on any site provider who occupies or controls a site to seek their consent to voluntarily grant the specifically requested Code Rights. If no consent is given within 28 days, the Operator can immediately apply to the Tribunal for the requested Code Rights to be given to it. The Tribunal must then make a decision within 6 months (if dealing with an application for a new site).
The Tribunal is likely to find in favour of the Operator, unless the site provider can successfully show that redevelopment of the site is actively planned and that granting the Code Rights would prevent that redevelopment. If there are no redevelopment plans, then provided the Operator can show that:
(a) the site provider can be properly compensated for any prejudice it will suffer as a result of Code Rights being granted; and
(b) the public benefit in making the order (enabling the public to have access to a choice of high quality telecoms networks) outweighs the site provider’s prejudice;
the Tribunal will make an Order in the Operator’s favour. So, unless aesthetic or personal considerations mean the site provider cannot be financially compensated, the site provider will struggle to defend an application and resist ECA being installed on their land.
They will be compensated fairly, right? Not necessarily
The Operator is required to pay the site provider monetary consideration (usually rent or a licence fee) in return for the Code Rights being granted. Unfortunately, since the introduction of the new Code, the amount of rent or licence fee likely to be received by site providers, including local authorities, will be far lower than the levels of rent previously enjoyed.
This is because the new Code has different valuation principles and ignores the significant benefit the site and the ECA installation upon it will have to the Operator in running its telecoms network. Instead, the Tribunal can only value the rent/licence fee based on how that space or land could otherwise be used. This is called the “No-Network Assumption”.
For example, where a local authority has a high rise block of flats, the value of the vacant roof space on the building will usually be low. There are very few comparisons in the market that can show high value alternative rental uses for this type of space.
- EE and H3G served Code Notices on Islington LBC
- The Code Notices sought Code rights to install and operate an ECA on the roof of Threadgold House, a ten storey block of 55 flats owned by Islington LBC
- The ECA was required to replace ECA already installed on a roof top nearby which had to be removed due to proposed development work
Negotiations had taken place before the new Code came into force in December 2017 and a rental payment of £21,000 per annum had been agreed in principle. However, the formal lease was not completed before December 2017. Once the new Code applied, EE and H3G served their Code Notices and then applied to the Tribunal for their Code Rights.
EE and H3G proposed in their Code Notice and Tribunal claim, a payment of just £2,551.77 per annum as consideration for the grant of the Code Rights for a period of 10 years. They argued that the rooftop site had only a nominal value of £1. Aside from use for ECA, the only other roof top use in the vicinity was either as a garden or for solar panels. They argued that neither of those uses would command a rent. EE and H3G put forward £2,551.77 p.a. to cover the nominal rental value and any additional compensation that the Tribunal might separately award.
Islington LBC put forward a valuation of £13,250 per annum relying on historic telecoms transactions in Islington in the 1990’s when the telecoms market was in its infancy (which values were increased to allow for inflation). They argued that in the 1990’s site providers did not really understand what rights they were willingly granting and the important value the sites had to Operators. Therefore they argued those historic values were comparable evidence of the value that a site provider would now be entitled to on the basis of the “no-network assumption”. Alternatively, they argued that the value could be determined on a £ per square foot basis based on Islington LBC rents charged for garages and open car parking spaces. They proposed an alternative value of £10,500 per annum.
The Tribunal found that the Code Rights in this case had only a nominal value of £50. However the total consideration payable under the Code was increased to £1,000 per annum in light of the fact that EE and H3G would also benefit from the landlord’s buildings insurance, their caretaking and management of the building, carrying out of roof repairs and connecting into the building’s fire alarm system without having to pay an additional service charge under the terms of the agreement sought.
What Local Authorities need to do
It is clear that site providers of telecoms sites can no longer command the same level of rents they had previously enjoyed prior to the new Code coming into force. As Judge Elizabeth Cooke recently stated in another Tribunal decision (CTIL v Keast) made on 8 April 2019;
“The Code makes provision for Code rights to be imposed on occupiers of land, and paid for at a market rent far lower than that which occupiers could have obtained in the absence of a code“.
The message therefore, is that Local Authorities need to act quickly if served with a Code Notice. They need to and consider:
(1) Whether they want to oppose, in principle, the grant of Code Rights.
If so, they need to establish evidence of redevelopment plans or the adverse impact the proposed ECA would have on the aesthetics of the site. Or find another good reason to show why the Local Authority could not be financially compensated.
(2) What alternative uses (other than for installing and keeping ECA) there are for the site in question which would have a rental value attributed to them. Expert valuation advice may need to be sought from a specialist surveyor; and
(3) Whether the Operator is seeking rights and benefits in the proposed agreement which go beyond the extent of the strict Code Rights they are entitled to claim (the 9 categories of rights). Additional value can be attributed to those contractual rights and benefits.