Telecoms powers

Since the 2017 Electronic Communications Code (the code) came into force, it has presented many challenges to property law practitioners on how best to advise their clients on this often complex area. In December last year, further updates to the code came into force when the Telecommunications Infrastructure Bill received royal assent. Now, therefore, seems an appropriate time to re-explore the code and the considerations we, as practitioners, need to have when advising our clients. 

Objective of the code

It is important when advising on this area to remember that one of the key objectives of the code is, in Ofcom’s own words, “to make it more straightforward for operators to gain access to the locations they need, to improve coverage, capability and capacity”. As this statement suggests, the code will often favour the interests of operators and the provision of communication services over the rights of landowners to control what is on their land. Unsurprisingly, this can often be a frustration to landowners.

Scope and powers of the code

The code applies to the installation of apparatus on private land by the operator of an electronic communications network (Ofcom maintains a register of such persons, who are referred to as code operators). The code grants significant rights to operators; the ones which most frequently come up in practice are:

• rights to install, keep, inspect, maintain, adjust, alter, repair, upgrade and operate telecommunications apparatus, including carrying out works associated with this;
• rights to share the use of telecommunications apparatus with other operators;
• connection into a power supply;
• rights of access to and from the operator’s apparatus; and
• rights to cut back trees and/or other vegetation which could interfere with the operator’s apparatus.

Obtaining code rights

It is important for landowners to understand that code rights are not automatic, and they can be obtained either through agreement between operator and landowner or, if such agreement cannot be obtained, by the operator making an application for such agreement to be imposed by a court order from the Upper Tribunal.  This position has created issues with unresponsive landowners given that there is an onus on operators to seek agreement with the landowner before making any application to court for the imposition of powers. The recent Telecommunications Infrastructure Bill has sought to resolve this problem by putting in place a form of four notices which operators can serve on landowners and, if no response is received to any of these notices, the operator may make an application to court for the imposition of powers.

Test for the imposition of code rights

Where agreement cannot be reached between the landowner and the operator, and the operator makes an application to court for the imposition of code rights, the court may make an order for the imposition of code rights if the following two conditions are met:

• that the prejudice caused to the relevant person (in most cases being the landowner) is capable of being adequately compensated by money; and
• that the public benefit likely to result from the making of an order outweighs the prejudice to the relevant person.

In determining the second limb of this test, the court must have regard to the public interest in access to a choice of high-quality electronic communications services.

The code in practice

Site inspections

Often, the first indication to a landowner that their land could become subject to code rights will be when they receive a request from an operator for what is called a “multi-skilled visit”. This is effectively a request from an operator that they (or their contractors) may enter onto the land or building in question to carry out investigations as to its suitability to have electronic communications apparatus installed upon it. 

Where such a request is declined, the operator may make an application to court under paragraph 26 of the code for “interim code rights” to allow the necessary investigation. While it is clear, in practice, that a landowner has limited ability to completely resist such inspections, there does appear to be some scope for limiting the types of investigations being carried out. 

Most notably in Cornerstone Telecommunications Infrastructure Limited v St Martins Property Investments Limited [2021] UKUT 262, the court did not agree to the operator’s request to carry out intrusive investigations (including cutting the roof covering on the building and drilling holes into the roof) and directed that the operator must first carry out non-intrusive works. If further, more intrusive, works were required then the operator should seek agreement for these and, failing this, make another application to the tribunal for a further order for interim rights.  

Dealing with renewals

Often the most problematic part of the code for landowners is the position on the renewal of agreements, which came into force prior to the 2017 code. Landowners will often find themselves obliged to enter into renewal leases with operators on significantly worse terms than those they previously enjoyed. This is in part due to the increased rights granted to operators under the code which are touched on above, but also due to the changes the code made to calculating the rental value of the new lease.

Under the code, rental values are calculated on a “no scheme valuation”.  This means that the rent is set purely on the value of the land and not on the value to the operator of its future use as a telecommunications site. Given the land in question will often be a small section of roof space or similar, this can lower the rental values considerably. 

Understandably, this potential reduction in rental value can make landowners less enthusiastic to deal with renewal agreements promptly. To encourage them, it is not unusual for an operator to offer an “incentive” premium where the lease renewal is completed by a certain date, to focus the mind of the landowner.  It is also usual that the operator will contribute towards the landowner’s legal and surveyor’s fees.

Landlord and Tenant Act 1954

An area that has proved challenging for practitioners since the new code came into force is the relationship between the code and the Landlord and Tenant Act 1954 (the 1954 Act). Fortunately, some clarity on this point has been given by the updates in the Telecommunications Infrastructure Bill.  

Prior to these changes, operators occupying land under a tenancy protected by the 1954 Act were compelled to renew their tenancy through the process set out in the 1954 Act rather than that in the code. This created a potentially strange anomaly as such renewals would have the rental values given by the open market rent rather than the “no scheme valuation” referred to above. 

However, this potential advantage for landowners has proved shortlived. The recent changes to the code set out that the renewal process for tenancies where the primary purpose is to confer code rights should not be more closely aligned to that set out in the code even where such tenancies benefit from security of tenure under the 1954 Act. A new section 34A has been added to the Act which sets out that rental assessments on such tenancies will include the following assumptions:

• a “no network” assumption that the transaction does not relate to the provision of an electronic communications network;
• an assumption that all code rights apply other than those relating to assignment, upgrading and sharing; and
• that the operator has an alternative which could be used for the rights sought.

These changes seek to bring an end to any uncertainty over rents which might be obtained under a 1954 Act renewal and bring these in line with the procedure set out in the code.

Lift and shift provisions

One important difference between the ‘new’ code and the pre-2017 code is that the code no longer has so-called “lift and shift” provisions built into it. These provisions were designed to enable a landowner to require an operator to relocate their equipment to a different part of the landowner’s property. 

Operators will sometimes, depending on the nature of the apparatus the agreement is dealing with, accept the inclusion of lift and shift provisions in code agreements, subject to sufficient notice periods and costs being met. As lift and shift is set out in the code, it is important for practitioners to check with landowners whether such provisions are required in a code agreement (for instance because of a planned redevelopment).

Terminating code agreements

As touched upon, the code grants certain rights of security of tenure (not dissimilar to those in the 1954 Act). For a landowner to terminate a code agreement, they must serve not less than 18 months’ notice and must satisfy one of the following four grounds for termination:

• the landowner intends to redevelop the site and could not reasonably do so unless the code agreement is terminated;
• the operator is in substantial breach of its obligations in the agreement;
• there are persistent delays by the operator in making the payments due under the agreement; or
• the test for the imposition of code rights (set out above) is not satisfied.

The most common of these grounds to come up in practice is the redevelopment ground, which was stated in EE Limited & Hutchison 3G UK Limited v Sir James HE Chichester and Other [2019] UKUT 164 (LC) to be a similar position to ground (f) under the 1954 Act. This means a landowner will need to demonstrate a firm and settled intention to redevelop to be able to rely on this ground.

It is not uncommon for operators to agree to break rights for landowners in code agreements; however, these will invariably be subject to the same notice period and conditions set out above.

Conclusion

Some, more experienced, landowners may now be up to speed with the code and its impact on their interests. However, practitioners will still encounter many landowners, particularly those with smaller portfolios, who will be surprised at the extent of the rights that the code confers upon operators. As practitioners, it is essential to manage the expectations of landowner clients as to what is possible when negotiating code agreements with operators. We must also have a clear understanding of the extent of the rights that operators are entitled to under the code. Through understanding the code and how it operates in practice, we can ensure that the process of entering into and renewing code agreements is as seamless for the client as possible.