Many farmers and landowners agree to electronic communications operators, such as mobile phone companies, installing aerials and other equipment on the roofs of their buildings or erecting masts on their land.
This can provide a useful source of income. But the new Electronic Communications Code contained in the Digital Economy Act 2017 and introduced on 28 December 2017, is likely to reduce landlords’ income from these agreements and leave them with less control over their properties.
The new Code is supposed to make it cheaper for operators to operate networks so they can plough that money back into developing more sites for UK PLC. Cynics would say that it is going to be the network operators’ shareholders rather than the public who benefit from any savings – and rent was not a great cost compared to the operators’ overall expenditure anyway. Yet under the new Code, operators are seeking to reduce mast rents from an average of £6,000 a year to just £500.
The reason why rents could fall is because valuations now have to disregard the fact that the land will be used for running a network: instead, it will be based on existing use values, which could be much lower.
As part of the reform of the old Code, the Government was put under pressure by the operators to allow them to upgrade and share telecoms kit to provide more widespread network coverage. This they allowed, so long as certain specific conditions are met – meaning, landowners may now not be able to benefit financially from upgrades or multiple operators sharing their site.
Aside from the lack of any financial benefit, landowners will also face various practical challenges if operators choose to exercise these rights such as the loss of control over building works; poorer security and access provisions; and, difficulty in removing the operators from their property.
Many argue that the old system worked. No one wanted to go to court and so engaged in brokering a deal under the old Code. The landlord got some rent which turned him into a willing landlord happy to have the operators on his property. The new Code risks turning them into reluctant landlords who will do whatever they can not to have the operators on their property. The result will be that landlords and operators won’t be able to reach agreement so the courts will have to impose them, leading to a lot of expense and bad feeling.
The new Code only applies to agreements made after 28 December 2017. The Code is not retrospective, but there are some transitional provisions for existing agreements. If you have an existing lease, the rent will usually continue at the current level. But if your lease has ended or is coming up for renewal, the new Code will be used by operators to lever rents down.
The new Code introduced sweeping changes to the law giving licensed operators the ability to apply to a Court to seek a specific right. Interestingly, there is no right to “add” equipment, which may give landlords room to negotiate for more rent. However, new rights to connect to a power supply; interfere with or obstruct an access route; and to lop trees have been added.
The Code covers telecoms apparatus belonging to “licensed operators” – those operators granted a license by OFCOM. Apparatus can be above ground (a phone mast) or below ground (a BT fibre).
Where an operator wants to, say, erect a telecom mast in a field, a notice under Paragraph 20 of the new Code is served giving the landlord 28 days to agree terms. If terms cannot be agreed, the operator can apply to the court to impose an agreement.
Batcheller Monkhouse is currently involved with a case where we had agreed a rent for a green field site at £7,000pa under the old Code. But since the new Code was introduced, that offer has been reduced to £500pa. With any incentive to agree to such a sum now lost, the landlord may bring forward his intentions to develop the land for another use such as erecting a shed or laying a hard standing. This way, any application to the court to force an agreement on the landowner is likely to fail.
The definition of “land” is significant under the new Code, as the new Code can only apply to “land”. Although “land” includes land and buildings, it does not include electronic communications apparatus which is defined as including “other structures or things designed or adapted for use in connection with the provision of an electronic communications network.” This might mean that some agreements relating to apparatus on adapted water towers, grain silos or other structures on farmland cannot be Code agreements and so be outside the rent control.
As was hinted at earlier in this article, the new Code does not entirely give the operators all that they need as can be illustrated in some of the following main changes:
|Upgrading or site sharing||Landowners could restrict upgrading or sharing or allow it subject to the payment of money or a share of the site share income.||Landowners cannot prevent or limit upgrading or sharing or impose any conditions (including a requirement to pay money). However, operators only have the right to upgrade or share if any change that arises has “no adverse impact, or no more than a minimal adverse impact, on its appearance” and that such works “imposes no additional burden” on the owner. An additional burden includes anything that “has an additional adverse effect on the other party’s enjoyment of the land” or “causes additional loss, damage or expense to that party”.|
|Consideration (i.e. rent)||Market rents could take into account the fact that the land was used as a telecom site.||Market rents must assume: “that the right …does not relate to the provision or use of an electronic communications network”.|
|Compensation||Landowners could seek compensation but rarely did as rent effectively covered not only the “price of agreement” but all heads of claim.||Faced with the prospects of a lower consideration, landowners are likely to claim compensation for their loss, as they are entitled to do. Typical heads of claim will be:
|Redevelopment||Complex provisions for the removal of apparatus.||Landowners must now give the operator 18 months notice to remove equipment, which is applicable only in certain instances, the main being where the owner intends to redevelop the property.|
- What are the operators likely to do? Operators are clearly concerned about undoing all their recent drives to foster better landlord/tenant relationships. However, the new Code gives them the tool to upset that relationship. Against the background of the pressure to roll out new technologies, operators will need to tread carefully in the way they use the new legislation to achieve that.
- What are the landowners likely to want? To protect income, owners are likely to:
- rely on the current ambiguities of the new Code to argue why the operators might not be entitled to everything they think they are. This is likely to centre on arguments relating to the adding, upgrading and sharing equipment. Owners may then offer to grant “Code Plus” rights in exchange for a sensible rent and;
- negotiate as high an element for compensation as is possible. Evidence will need to be examined on the effect of radio masts on the value of adjoining property, and the cost of administering and supervising each access request.
To protect their property, owners may try and prevent a new Code agreement being granted by either preventing the apparatus coming onto the land altogether as a result of their intention to redevelop or by allowing the apparatus to be installed onto something other than “land”. Either way, owners are likely to put the operators to task to prove the “Access Test” in that:
- the prejudice caused to the landowner is capable of being adequately compensated for by money; and
- the public benefit outweighs the prejudice to the landowner.
There are few landowners who want to be a barrier to mobile phone connectivity. However, landowners do have a sense of what is fair and reasonable. The answer to the question “The New Telecoms Code – A Help or Hindrance?” and its objective to help the roll out of new technologies for 5G does depend on the operators not getting too heavy handed. Unfortunately, with only a few months into the new regime, we are not full of optimism.
For more information please contact:
Tom Bodley Scott