Clear Guidance on renewal terms under the Electronic Communications Code

Clear Guidance on renewal terms under the Electronic Communications Code provided by  the Tribunal in the recent case of EE Ltd and another v Stephenson and another [2022] UKUT 180 (LC) (“Stephenson”)

The new Electronic Communications Code (the “Code”) came into force in 2017 in order to assist operators in offering a reliable and extensive telecommunications network to the public by granting them greater rights to install electronic communications apparatus on land.

One of the main bones of contention between landowners and operators since the Code first came into force has been how much rent operators should pay to landowners in return for the benefit of using their land.

This was one of the key focusses of the Stephenson case, alongside other considerations about the broadness of the rights that should be afforded to operators in the context of the Code.
Valuation

The Tribunal awarded the landowner an annual rent of £750 in respect of the site, which is a reiteration of previous approaches that generally speaking greenfield sites should fetch around this figure, subject to site-specific nuances which result in a higher rent being justifiable.

Consideration

In terms of what to take into account under this heading, the following should be noted:

• Comparable transactions are irrelevant unless they relate to alternative use value and therefore demonstrate how other comparable sites are used and, as such, how the site in question may be used if not for an operator being in situ on the land.
• Factors that are relevant to how the rent should be negotiated in the context of a new letting under the Code should be taken into account (i.e. those referred to in the Vodafone Limited v Hanover Capital Limited [2020] EWMisc 13(CC) (“Hanover”) case, such as any additional benefit being conferred on the operator as a result of the letting, or any greater burden being placed on the landowner than would be placed on them if they let the land for an alternative use).

Compensation

• Lost opportunity is dealt with as part of consideration (when providing comparables in respect of alternative use value), so no compensation would be awarded for this.
• Diminution in value of a site is a distinct point, so if diminution can be demonstrated, then the Code does not preclude compensation being awarded in this respect in the future.

Other renewal terms

Upgrading and Sharing

• The Tribunal was sympathetic to the operator in respect of both of these terms and granted them the ability to freely share their rights with sharers, as well as unrestricted upgrading rights.
• Paragraph 17 of the Code does only allow upgrades to the extent that they do not ‘impose an additional burden on the Landlord’ or ‘cause no adverse impact, or no more than a minimal adverse impact, on the appearance of the equipment’. That said, there is some degree of a question-mark over what these terms actually mean, such that it appears the Tribunal decided to take the common-sense approach of ascertaining whether realistically speaking there was clearly a foreseeable risk that loss or damage would be suffered by the landowner, here, if upgrading rights were not limited in some way. They decided not.

Redevelopment break and indemnity

• Notwithstanding the Tribunal’s approach in general being largely weighted towards the operator in terms of offering a low rent even despite the operator’s largely unfettered rights, these two particular elements of the agreement did consider the landowner’s position sympathetically.
• Even though the landowner had no obvious intention to redevelop the site in the near future, they were awarded a redevelopment break in a bid to try to rebalance a sense of fairness in the context of the landowner losing alternative use of its site as a result of Code rights being imposed.
• In terms of the indemnity clause, the Tribunal rejected the idea that the operator should only have to indemnify the landowner in respect of claims resulting from acts by it of negligence or omissions. They took the approach that where the landowner is receiving such little rent in respect of a site, they should not be expected to have their risks increased because of highly caveated indemnity provisions.

In summary
All in all, the Stephenson case has reaffirmed previous approaches taken by the Tribunal and cemented the fact that the Hanover case should continue to be referred to where valuation is concerned and comparables relating to other telecoms sites need to be scrapped.

It has also triggered a reminder of the purposes of the legislation, which is to as much as possible promote and facilitate an effective and prosperous network, such that upgrading and sharing rights should not be restricted unless there are clear and tangible reasons why they need to be in the context of the particular site.

That said, unfettered redevelopment breaks are something that landowners should certainly fight their corner on if they have any inkling of alternative plans for their site which would need telecoms apparatus to be removed; and they should also stand their ground in reducing their risk as much as possible via the indemnity provisions drafted into code agreements. The Tribunal took the approach that both of these are only fair in the context of landowners receiving so little in return for having Code rights thrust upon their sites.

If you have been approached by a code operator wanting to exercise rights upon your land and you need some assistance, please do not hesitate to contact either James Robinson ([email protected]) or Danielle Eley ([email protected]) who will be happy to assist.