The ‘new’ telecommunications code may not be so new anymore, having been around since December 2017. But thanks to a raft of cases testing its limits and interpretation, we have a far better understanding of its impact than we did when it was first introduced. So what have we learnt? We set out the 5 key things for landowners to remember about this tricky piece of legislation.
1. Its effect on rents is likely to be depressing
Under the Old Code, telecommunications sites were valued at their open market value and valuers were allowed to have regard to their usefulness as a telecommunications site. Not so anymore. Now, sites are valued according to their market value but disregarding any telecommunications use. For small parcels of land in awkward locations or on rooftops, that can seriously reduce their value, resulting in significantly lower rents (or ‘compensation’ as it is now called) for site providers.
While operators will offer lower rents on this basis, there may be other commercial factors landowners can use to negotiate something higher. Instructing your own surveyor experienced in telecommunications leases may also assist landowners to increase the rents they achieve.
2. You might be able to get one last lease on the ‘old’ values
The transitional provisions of the New Code are complex and much will depend on the specific facts of each individual case. However, the Court of Appeal has confirmed that in certain circumstances, operators will have to renew their leases using the Landlord and Tenant Act 1954 one last time before they feel the full benefit of the New Code, including its lower rents.
In Cornerstone Telecommunications Infrastructure Limited v Ashloch & Another, the Court of Appeal confirmed that where an operator was in occupation under a lease which was continuing under the 1954 Act, its route to renewal was to request a new lease using the 1954 Act, which would assess the rent at normal market value taking account of its use as a telecommunications site. Once that new lease expired, the operator could then renew using the New Code, on the new rent assumptions.
This could open the door to certain site providers caught by the transitional provisions to push for a higher rent for the next renewal, which over a ten or twelve year term, could amount to a significant difference. The case has a review pending before the Supreme Court, but if a telecoms operator on your land is looking to renew, it would be worth seeking legal advice in case you might be able to get one last 1954 Act renewal.
3. It could be very easy to accidentally grant New Code rights to an operator
Telecommunications agreements are onerous, so it would be easy to assume that a certain level of formality would be required in order to legally grant code rights. Unfortunately, that is not the case.
All that is required to grant a new code agreement is that the agreement:
(a) is in writing;
(b) is signed by the parties to it;
(c) states how long the code right is exercisable for; and
(d) states the period of notice required to terminate the code right.
While that might sound reasonably formal, in the recent case of Neocleous v Rees the Court held that an agreement reached in the course of email correspondence between solicitors was ‘signed’ due to the automatic email signature which added the solicitor’s name at the foot of the email.
In that case the Court was concerned with the Law of Property (Miscellaneous Provisions) Act 1989 rather than the New Code, but the requirements are very similar and it remains to be seen whether the same could be said for Code Agreements. While longer-term leases would need to be made by deed, even a short-term Code Right would have statutory protection and would therefore be harder to terminate. It’s therefore very important to ensure that any correspondence with operators is marked ‘without prejudice and subject to contract’, or to add caveats to your email footers to try and minimise the risk of an email accidentally granting Code rights.
4. Code Rights can be granted by someone other than the owner of land
Code Rights are granted by the occupier of a site, which could be someone other than the legal owner (either leasehold or freehold) of the land. While rights granted by someone with a lesser interest won’t automatically bind a party with a superior interest, there is a mechanism under the New Code whereby the operator can ask the superior landlord to agree to be bound by the rights. If the superior landlord refuses, the operator can ask the Tribunal to bind them.
When deciding whether to make an agreement binding on third parties, the Tribunal must have regard to the public benefit of the site. Where an operator is already in situ and can demonstrate some harm to the network if it is forced to leave, it is likely to be harder for a landowner to resist a claim that it should be bound by the Code right. For this reason, when granting leases or other interests out of their land, landowners should take advice about restricting lessees or other occupiers from granting Code Rights, and perhaps including indemnities or other compensatory mechanisms under the agreement in the event that they do grant Code rights.
5. The New Code is complex and many operators are prepared to litigate over it
The New Code has only been in force for around three and a half years, but in that time, it has generated a significant number of cases. Some operators are happy to litigate in order to secure the sites, rent and other terms they seek. Equally, despite the Government hoping the New Code would facilitate negotiation, the rents offered are sometimes so low that site providers might feel they have no alternative but to seek to terminate agreements, or argue for higher rents before the Tribunal.
The gulf between parties on rents is not the only factor causing more litigation though – the New Code is drafted rather ambiguously in places, meaning several cases have been brought due to disagreements over what the code actually allows or not. To add to the confusion, there are complex transitional provisions which apply differently depending on when a lease was first granted, when the fixed term expired and whether or not the lease was a business tenancy under the Landlord and Tenant Act 1954. There are also strict and sometimes quite short time limits within the New Code for agreements to be reached, failing which, the operator or site provider can apply to Court. All of this has led to an increase in litigation and hundreds of cases before the Tribunal.
Summary
Under its current guise, landowners could lose out significantly when operators seek to renew agreements at greatly reduced rents. The complexity of the Code and its different application to different sorts of leases makes it essential to seek professional advice early on, to try and maximise the rents achieved under any renewal lease.
If you require assistance with a telecommunications issue, please contact Jamie Kidd or Georgie Wood who are members of the property litigation team.
The information on this site about legal matters is provided as a general guide only. Although we try to ensure that all of the information on this site is accurate and up to date, this cannot be guaranteed. The information on this site should not be relied upon or construed as constituting legal advice and Howes Percival LLP disclaims liability in relation to its use. You should seek appropriate legal advice before taking or refraining from taking any action.
