Telecoms code leads to fall in number of new leases

The new Electronic Communications Code was supposed to assist in addressing rural not-spots and improve the digital economy across the whole of the UK, but the number of new leases has fallen dramatically as a result of its introduction.

The purpose of the Code, introduced in December 2017, was to speed up the rollout of mobile and broadband services in rural areas by giving operators new powers to deploy and maintain telecoms equipment, if an agreement is not forthcoming with a landowner.

Prior to the 2017 Code coming into effect the top ten agents acting for landlords negotiated over 400 new agreements. In the subsequent 12 months to December 2018, the same agents agreed less than ten new leases. Furthermore, it is our understanding that the number of new agreements made by some operators’ agents is also down to similar levels, whereas they were agreeing some 450 new leases per year in previous years.

Operators are making offers for new sites for as little as £50 a year, when previously rents of around £12,000 per annum were available for rooftop sites and £5,000 per annum for greenfield sites.

Landowners are not persuaded by the sums on offer. Rather than tackling the problem of not-spots, the code is reversing a consensual market which was working fairly well up until its introduction.

Significant tribunal cases

The Electronic Communications Code is a complex piece of legislation affecting many landowners. It is in its infancy and its effects are being worked out through a series of decisions of the Lands Tribunal as inevitably it is being vigorously contested.

The most recent Code decision, CTIL –v- Compton Beauchamp Estates Limited, has implications for landowners with existing agreements.

CTIL, which is a joint venture between Vodafone and Telefonica, sought an order from the Tribunal pursuant to paragraph 20 of the Code which would have imposed a new agreement for a site where a third party, Vodafone, was the occupier.

The Tribunal have ruled that to be in a position to confer Code rights by agreement, a person must be an occupier of land. This is a question of fact rather than a matter of legal status and involves issues of who has physical presence on and control of the land in question, which in this instance was Vodafone and not the landowner. A landlord of a site leased to a third party cannot comply with a paragraph 20 notice served on them.

This is an important decision in that most new Code approaches are in respect of existing agreements with operators seeking to achieve substantial rent reductions.

This decision also develops the Tribunal’s views with regard to consideration set out in the earlier case of EE & H3G –v- The London Borough of Islington. Operators are offering rental value for new agreements site using the existing use value of land as a starting point, which is then decapitalised to give a notional annual equivalent.

The methodology assumes that a small parcel of land will have the same value per square metre as a much larger block. This exercise inevitably results in a tiny sum when converted to a leasehold annual figure. This does not take into account the understandable reluctance of any rural landowner to lose control of their land to the extent that the Code agreements being sought demand. The Tribunal held that such a method of assessing consideration is not a reliable way of determining the landowner’s agreement to be bound by the Code right.

It is to be hoped that both these decisions lead to more realistic offers in the market place and avoid the proliferation of Lands Tribunal hearings that we have seen in recent months