Briefing 22 December 2016

Telecoms: a new era for operators and landlords

Author:

Helen Pickard

Associate
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Summary and implications

The Telecommunications Act 1984 (and its many subsequent amendments) (the Current Code) has been described as one of "the least coherent and thought through pieces of legislation on the statute book".  30 years after the Act, the government has decided it is time for an overhaul. This has led to the Digital Economy Bill 2017 (the Bill), currently making its way through Parliament.

The government's aim is to support investment in network growth by telecoms operators to equip the UK with the best possible digital communication infrastructure. The draft legislation gives operators greater rights on the land they occupy and reduces a landowner's ability to restrict an operator's use of their land, as well as making it more difficult to remove them.

Where are we now?

These changes are not yet law and still in draft, so it is possible that changes may still be made. However, the draft Bill gives us a good idea of what the new legislation (the New Code) may look like. Judging by the current draft, it looks as if 2017 will herald a new era for the rights of telecommunications operators.

The most significant changes likely to affect landowners

Upgrading and sharing equipment

Current Code: Landowners are entitled to limit, approve and restrict what apparatus is on site and approve any new apparatus and restrict who may be in occupation.

New Code: There will be an automatic right for operators to share and upgrade apparatus without prior agreement or any monetary compensation to landowners. Any attempt to restrict this by agreement will be void, as long as:

  • there is minimal adverse impact; and
  • there will be no additional burden on the landowner. This includes an additional adverse effect on the other parties' enjoyment of the land and causing damage, expense or inconvenience.

Comment: It is unlikely that either of these restrictions will give much protection to landlords of multi-let office buildings in towns and cities, and seem to be designed with open fields and countryside in mind.

Assignment

Current Code: Landowners can prevent, limit or impose conditions on assignment.

New Code: Any provision that prevents or limits a proposed assignment will be void. However, it appears that landowners may still be able to insist on an AGA on any assignment.

Contracting out of the New Code

Current Code: It has been possible to partially contract out of the Current Code and to include contractual provisions that, if an operator exercises Code rights, a landowner is entitled to an indemnity.

New Code: It will not be possible to contract out of the New Code at all and operators cannot be charged penalties for exercising their Code rights.

Market value

Current Code: Currently, the value of land has been based on the value of the right to maintain infrastructure on private land (i.e. the value of the land to the operator, rather than its value to the landowner).

New Code: The New Code will introduce a change to the compensation/valuation of land based on the principles of compulsory purchase. This means that the land is to be assessed on the basis of its value to the landowner rather than its value to the operator.

Comment: The government is keen to ensure that landowners should not have a share of the economic value created by higher public demand for services provided by the operator. The new valuation system is likely to see sums paid by operators to landowners dramatically reduced.

Termination/Redevelopment

Current Code: A landlord can currently serve a paragraph 20 and/or paragraph 21 notice to require an operator to remove its apparatus. Unless the operator serves a counter notice within 28 days, the apparatus must be removed. If a counter notice is served, a court order is required to remove the apparatus.

In addition to this, operators are also given additional protection (unless they have agreed to contract out) under the Landlord and Tenant Act 1954 (the 1954 Act). This creates its own problems as arguably a landowner is not entitled to serve a paragraph 21 notice if the agreement has the protection of the 1954 Act, because the lease is continuing under a statutory tenancy. So, a landlord must deal with the 1954 Act issues before it can serve a paragraph 21 notice. This means that a landowner is unlikely to be able to prove its ground for redevelopment if it still needs a court order under paragraph 21 to remove the apparatus.

New Code: The good news is that the 1954 Act will not apply to the New Code agreements. However, the New Code is unlikely to be retrospective, so there may be a period of time where the two Codes will co-exist. The government intends to introduce transitional provisions but we do not yet know what these will look like.

To obtain possession under the New Code, landowners will have to serve 18 months' written notice to terminate on one or more of the specified grounds, namely:

  • substantial breaches;
  • persistent delay in making payment;
  • redevelopment; and
  • where the test for imposition is not made out (i.e. where a landowner can be adequately compensated in money, and the public benefit is likely to outweigh the prejudice to the landowner).

The agreement will come to an end unless the operator serves a counter notice within three months of the date notice is given and issues proceedings within three months of the date of the counter notice (i.e. total six months). If the operator does serve a counter notice, the court will determine whether the ground(s) specified in the notice are made out.

It is intended that all disputes will be referred to the Upper Tribunal (Lands Chamber) rather than the court. This should mean that disputes are dealt with more quickly than is currently the case.

What landowners can do to prepare

Landowners who already have operators on site should keep up to date with progress of the draft Bill, as it makes its way through Parliament. There are also some practical steps that landowners can take now:

  1. consider whether any telecoms agreement, entered into now, should be contracted out of the 1954 Act.
  2. make sure any upgrades or new installations by operators are fully documented under any current agreement. This will put you in a good position to work out whether any upgrades or changes have been made when the New Code comes into force;
  3. where existing sites are income-producing, consider whether an operator can terminate their agreement early and whether it may be worthwhile trying to put a new agreement in place now under the Current Code or begin planning now for any reduction in rent;
  4. if a site is ear-marked for development in the next two/three years, consider putting in place, or reviewing your strategy for redevelopment with the New Code in mind, as it may take longer to recover possession of the property once the New Code is in place;
  5. going forward, try to ensure that any new agreements contain a provision for an operator to give you notice if they decide to share or upgrade their equipment. Alternatively, agree a clause requesting information about who is in occupation, or when any upgrades/sharing take place by the operator. Even if you cannot restrict what an operator can do on site, this will help you to understand who is in occupation, if you want to terminate the agreement.

Whilst the draft New Code may not fill landowners with festive cheer, it may encourage them to make a New Year's Resolution and put in place strategies to prepare for the changes.