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The New Electronic Communications Code – what have we learned?

27 October 2020

It is approaching almost three years since the new Electronic Communications Code was introduced and, whilst the waters are still fairly murky, a number of tribunal cases have started to give us a glimpse at what the world looks like for land and property owners under the New Code.

Why was the new Code introduced?

To set the scene, it is useful to look back at the situation before the New Code was introduced. There used to be legislation governing phone masts and cables which is now known as the ‘Old Code’ which had many faults. It conflicted with other pieces of legislation in such a way that most of its provisions were unworkable, so in practice it was rare for anyone to rely on the legislation, instead if an operator wanted to build a mast in a certain area, they would approach local property owners to see who was interested. To help spark their interest, rents were negotiable and were often based on the value to the operator, so masts in urban areas or city centres were naturally worth far more than remote rural locations. It was also common practice to charge an additional fee for every networks that shared a site.

The problem was that the Old Code rarely helped resolve disputes or manage situations where property owners simply refused to allow equipment on their land or demanded exceptional rents. In most cases that wasn’t an issue as the operators would simply approach one of their neighbours instead, but in some cases there weren’t any neighbours with suitable sites, With Government and the public demanding national mobile phone coverage, the operators simply had to meet the demands of the owners.

For years mobile phone networks have been lobbying for legislation to fix this problem, they wanted rights akin to utility companies who can enter private land, by force if necessary, to offer an essential public service. They also wanted to save costs on rents which they could re-invest into rolling out a better service and filling any previously inaccessible black spots in the network.

What they got was the New Code. Government didn’t want to introduce draconian compulsory purchase rules, but in order to fix the historic problems, the legislation needed some teeth. It set some rules which apply to all new agreements, such as allowing masts to be shared between all networks without the owner charging an additional fee, any operator can freely upgrade and improve their equipment so long as the visual impact is kept to a minimum, and owners shouldn’t be able to create ransom scenarios to charge excessive rents. In simple terms, it tries to encourage business as usual, owners and operators should try to negotiate leases on consensual terms wherever possible and the courts should only be relied upon when all other options have failed.

The problem is that no one yet knows what new leases will actually look like, operators have made demands to reduce rents on lease renewals from £5,000 a year to as low as £24. Understandably this has been met with resistance from owners. So rather than freeing up the industry for the roll out of 5G networks, it has instead created a stalemate as everyone looks to the tribunals to determine new lease terms.

The vision was good, but the impact leaves a lot to be desired.

What should an owner do?

Some mobile phone companies have been adopting aggressive tactics in correspondence, referring to the New Code and threatening legal action if the owner doesn’t accept their terms, including a sizeable rent reduction. This approach has been unhelpful as it can be upsetting to receive such a notice and sets a confrontational tone for the rest of the negotiation. This behaviour hasn’t gone unnoticed by the Courts who have criticised operators for their behaviour in a number of cases.

That said, these criticisms apply both ways, owners have been criticised just as frequently by the Courts for any behaviour which is intentionally obstructive or fails to make any meaningful progress towards reaching a consensual agreement.
The Code makes it clear that owners and operators are responsible for actively trying to reach a consensual agreement. Operators should be considerate to the requirements of owners who probably don’t want the equipment on their property, while owners should willingly try to work towards an agreement, knowing that the Tribunal are very likely to impose one if required and will not look favourably on an owner who has deliberately resisted an agreement.

The simple answer to the question of what should an owner do if asked to grant a new lease is to seek professional advice. Objecting the plans out of principle will only invite the case to go to the courts, and simply ignoring the letters will do the same too. With good advice owners can understand what issues are or are not up for negotiation, and if the operator is equally cooperative, there shouldn’t be any need for legal action from either side.

What Legislation Applies, Code or ’54 Act?

One of the most important questions which has come out of the Code is a question about which piece of legislation governs any particular site.

Commercial leases are governed by a piece of legislation known as the Landlord and Tenant Act 1954. This grants rights to the tenants of commercial properties to apply to the courts to renew their leases when they come to an end. Likewise, the New Code also grants telecoms operators the right to apply to the courts to renew their leases when they come to an end. Sound familiar?

One of the problems of the previous legislation was the conflicts it created with other areas of law. To fix this, the New Code makes a specific provision by saying that the ’54 Act will supersede the Code under some rather complicated transitional provisions.

What this means is that if you have a telecoms mast on your property and the lease is coming to an end, if that lease is protected by the ’54 Act, the operators must use the ’54 Act provisions to renew that lease, not the Code. After that point, the Code renewal process applies. This means that when a lease comes to an end, one of the first questions to ask is which piece of legislation applies as it has a significant impact which we’ll come onto next.

What is a mast worth?

This is probably one of the most frequently asked questions, but equally it has been one of the hardest questions to answer. The simple conclusion is to say that every site is unique and so there would be no one size fits all answer, but we can look at a number of tribunal cases to get a bit of a feel for the likely answer.

54′ Act Renewal

As flagged above, it is important to know which piece of legislation applies to the mast. In the event that the ’54 Act applies, we can turn to the case of Vodafone v Hanover Capital [2020]. This case looked at a telecoms mast in a car park of an industrial estate in Greater Manchester, the lease had expired but was protected by the Landlord and Tenant Act 1954. Vodafone applied to the County Court for a new lease who awarded a ten year agreement at an annual rent of £5,750 per annum. In this case, the court considered the market value of the agreement and looked at historic telecoms mast lettings as evidence.
When the 10 year agreement expires any new agreement will be set under New Code rules, but for now the 54’ Act allows owners to continue receiving a market rent for their properties.

New Code Renewal

Where the code applies, a valuation must follow specific rules, one of which makes the assumption that the site is not being used for electronic communications. This valuation has led to a lot of head scratching and disputes between site providers and operators and, whilst it is still in dispute, we have a couple of tribunal decisions we can look at.

Rooftop Mast

The case of EE Ltd. v London Borough of Islington [2019] looked at the value of the rooftop of a block of flats. During the assessment, the tribunal asked what the rental value was for a rooftop, ultimately concluding that there is no demand or market for renting rooftop space other than for telecoms equipment. Because the Code requires that valuers ignore the fact an agreement is for a phone mast, the Tribunal concluded there was no market, so there is nothing more than a minimal market value.

They gave the rooftop a modest value of £50 per year, to which they added a contribution towards the service charge which the residents pay arriving at a figure of £1,000pa. EE had been offering to pay £2,551.77 from the outset, so the tribunal agreed it would be fair to stick with that price.

Agricultural Land

In the recent case of CTIL v Fothringham [2020] the Lands Tribunal for Scotland looked at the value of a rural Scottish mast. CTIL proposed £253pa while the landowner proposed £5,600pa. Both proposals were rejected for differing reasons by the Tribunal, who then had to come to their own assessment. Under time pressure made worse by the COVID-19 restrictions the Tribunal concluded that the mast agreement is worth £600 per annum, with an initial fee of £1,500 for the first year, reflecting the disturbance during refurbishment of the mast. In making the decision, they openly explained that there was no maths or science involved in arriving at those figures, “…They are simply set at levels at which we think a willing seller acting prudently would consider it worth taking on the risks and obligations….”.

In each of these cases, the terms are site specific, but they illustrate the approach that the tribunals are making when determining these cases. Some of these cases may be subject to appeal, but for now one thing we can predict is that the days of telecoms masts paying rents of many thousand of pounds per year may well be behind us.

If you own property with a telecoms mast, or if you have received correspondence from mobile phone operators and would like advice in this very complex area of law please contact GSC Grays.