Were the initial anxieties of public and private sector landowners about the Electronic Communications Code justified? James Nelson, Lillee Reid-Hunt and Nicholas Grundy QC examine its impact.
The fundamental provisions of the new Electronic Communications Code (“New Code”) came into force following the passing of the Digital Economy Act 2017 (“DEA17”). The New Code grants telecoms operators statutory rights to install, maintain and operate their electronic telecommunications networks over land subject to agreements with landowners – of both the private sector and the public sector.
In the lead up to the introduction of the New Code, many legal commentators opined that the legislation did not strike an equitable balance between the established rights of landowners and the new rights granted to operators. The New Code exposed four key areas of concern for landowners:
- The Grant of Rights – to what extent will the courts be willing to grant new rights to operators and will this undermine the landowner’s interest?
- The Valuation Aspect – does the ‘no scheme’ principle under the New Code hamper a landowner’s ability to seek a reasonable rent from an operator?
- Lack of visibility over Assignment/Upgrading/Sharing – does the New Code enable landowners to retain any control over the land occupied by telecommunications equipment?
- The Termination of Code Agreements – does the New Code enable or inhibit the ability of landowners to remove operators from their land?
Almost two years on from the New Code coming into effect, this guidance shall consider whether the provisions of the new legislation and related court judgments exacerbate or alleviate landowners’ initial anxieties.
Historical backdrop – why was the new ECC introduced?
Over the past few decades, telecommunications infrastructure networks have been vital in facilitating advances in technology. Certainly, the recent rollout of the 5G network, the emergence of e-commerce giants such as Amazon and the wave of global social media platforms all owe their continuity to the developments in telecommunications infrastructure.
The response from businesses and politicians alike has been a joint cry for improved and faster connectivity. As such, telecommunications operators have sought to source appropriate plots of land (commonly rooftops in cities or remote rural sites) from landowners to house their network masts and apparatus.
The first piece of legislation that governed the relationship between landowners and operators was the Telecommunications Act 1984 (the “Old Code”). Upon a backdrop of privatisation in the 1980’s (after all, British Telecom was privatised under the same Act), the Old Code was designed to provide protection to operators in the exercise of ‘code rights’ under written agreements. Such rights included for example; the right to install and maintain telecoms equipment and the right to challenge the landowner under a protracted notice procedure.
Nevertheless, it had long been accepted for several years that the Old Code was an antiquated piece of legislation, not fitting for the rapid expansion plans of telecommunications operators and rather devastatingly labelled by a High Court judge as “one of the least coherent and thought-through pieces of legislation on the statute book" . Government consultation on reforming the Old Code was released as late as 2015 and set out to ‘strike the right balance between all parties involved ’.
The DEA17 came into force on 28 December 2017 to facilitate and expedite the rollout of high-speed digital telecommunications infrastructure across the UK.
Key provisions under the New Code
The introduction of the New Code has changed the balance of negotiating power in favour of operators against landowners. Furthermore, some would argue that balance of power created by the New Code to some extent mirrors compulsory purchase powers vested in some public bodies and utility companies.
County and district councils are not exempted from the rights of operators to, in effect, demand a right to site telecommunications equipment on land owned by local authorities. As owners of large areas of land, particularly in urban and sub-urban areas, local authorities are likely to be the subject of ‘requests’ by operators for Code Agreements.
The New Code is applicable to the following agreements:
(a) All agreements from 28 December 2017: An agreement under the New Code must be granted to an operator by the landowner (which includes tenants and licensees), although the courts have the power to impose a Code agreement on any ‘relevant person’ (which may include the freehold owner). The court is likely to impose a Code agreement if:
i. the relevant person can recover monetary compensation (for the detriment caused by the installation of equipment); and
ii. the anticipated public benefit outweighs the prejudice to the landowner.
(b) Some agreements that were in existence prior to 28 December 2017 (subject to prescribed modifications): The New Code contains transitional provisions that bring Old Code agreements (or ‘subsisting agreements’) within the ambit of the New Code, but subject to modifications so that some of the terms of a subsisting agreement continue to have effect. Note that the New Code will not apply to all subsisting agreements, which may be instead subject to the provisions of the Landlord and Tenant Act 1954 (“LTA 1954”).
Whilst the legislation codifies many aspects of the relationship between telecoms operators and landowners, we now turn our attention to the four dominant concerns arising from the New Code and consider in turn whether or not these concerns have been realised.
1 – Grant of Rights
To support the overarching aim of the legislation, operators enjoy various Code rights including (but not limited to) the ability to install apparatus on land, to enter onto land to carry out activities necessary for the continued and/or improved function of such apparatus (i.e. repairing, maintenance, alterations, replacement works and upgrading), to connect into a power supply, to interfere with or obstruct access to land, and to carry out works on land for or in connection with apparatus on the land.
It is unclear under the New Code whether the Code rights are treated collectively as a bundle or whether they are divisible. Parts of the New Code appear to treat the rights as divisible (for example, para 34(4) refers to a code agreement pursuant to which “more than one code right is conferred”), but case law suggests that the courts will construe a code agreement widely so as to give full effect to all provisions of the New Code. Unlike the Old Code, the New Code cannot be contracted out of.
Perhaps the most interesting development concerns the readiness of courts to grant ‘interim’ code rights to operators under the New Code:
- EE v London Borough of Islington (“EE”)  - EE was faced with the loss of a telecoms site and needed somewhere new to situate telecommunications equipment. One possibility was on the roof of a block of flats owned by the London Borough of Islington (“LBI”). Whilst LBI was willing, in principal, to grant EE a code agreement in relation to the roof there was not agreement about the consideration. LBI was not willing to grant interim rights to EE. Applying the test the Tribunal granted EE interim code rights and adjourned the issue of the consideration to the final hearing.
- CTIL v University of London (“UL”)  - the Upper Tribunal (“UT”) held, unsurprisingly given the width of the definition of code rights in paragraph 3 of the New Code that interim code rights include a right to carry out a survey on a site to determine whether or not a site is suitable.
These decisions perhaps reflect the low hurdle to which operators have to surmount to be awarded an order granting interim code rights.
2 - Valuation Aspect
Whilst not necessarily a golden goose, the leasing of redundant or remote land as telecoms sites provided landowners with a consistent flow of easy rental revenue. Under the Old Code, rents were agreed between the parties using generally the same methodology as a standard commercial lease.
However, codification of the valuation methodology under the New Code resulted in a shift from a market value approach to a ‘no scheme valuation’ approach, which disregards the value of the telecoms agreement to the operator in favour of the value of the land affected. Additionally, the legislation cut landowners’ ability to boost low rental income with ‘payaway’ provisions that enabled a landowner to take a cut of the income generated by site sharing agreements between operators. Given that the land occupied by telecoms apparatus has, generally speaking, little to no value for other uses, landowners understandably felt disadvantaged by the revised methodology.
Surprisingly, the anxiety around valuation changes has in reality been over inflated because the UT has taken a common sense approach when assessing the methodology by acknowledging the presence of other factors:
- EE v London Borough of Islington (“EE”) - the site in EE was a roof top which had little market value outside its use for telecommunications equipment - on this basis the operator contended for a ‘rent’ of £1 per annum. The UT rejected this approach, stating that the nominal value of the rights being granted would, under the ‘no scheme valuation’ approach, be £50. The UT further increased the rent because EE would get the benefit of services for which the residential occupiers of the block paid a service charge. As such, for the terms imposed in this case the UT assessed that the consideration that willing parties would agree would be £1,000 per annum.
- CTIL v Compton Beauchamps Estates Limited (“CTIL”)  – the site in CTIL was on a farm and as such, the operator contended that the rent would be based around agricultural value of the land. The UT rejected this approach, having regard to the fact that the consideration is the amount ‘a willing buyer’ (i.e. an operator) would pay a ‘willing seller’ (i.e. a landowner) for the agreement. In this instance, a willing seller would have reasonable reservations about the access that the operator’s staff and agents would have over the landowners’ land and that those reservations would have to be compensated.
3 – Lack of visibility over Assignment/Upgrading/Sharing
The New Code expands on the rights afforded to operators under the Old Code. If an upgrade or addition to equipment can be made with minimal adverse visual impact and no additional burden to the landowner, then this can be done without landowner consent. The benefit of any increased value in the site resulting from this lies solely with the operator.
Operators no longer need to seek landowner consent to assign a telecoms agreement or share use of a site with another operator. Consequently, landowners risk losing a grip on the identity of the operator or operators exercising Code rights at the property. This is exacerbated by the fact that the agreements need not be registered to bind third parties.
The only mitigating action that a landowner can take is in the case of a proposed assignment, where the New Code permits a landowner to impose a condition that the assignor enters into a guarantee agreement with the landowner.
Landowners with subsisting agreements have a residual benefit in that their terms dealing with assignment, upgrading and/or sharing take precedence over the New Code provisions.
4 – Termination of Code Agreements
The New Code regularises the relationship between operators and landowners, but the difficulty in terminating a telecoms agreement places a significant burden on property, potentially decreasing its ultimate value.
While an existing agreement (that does not primarily function to confer Code rights) may be covered by the LTA 1954 and terminable:
(1) pursuant to more grounds (i.e. a landlord’s own occupation), which are well understood by expansive case law; and
(2) upon less than 12 months’ notice
any agreement covered by the New Code requires an extensive 18 months’ notice to be given to the operator.
This is significant given the considerably shorter 28-day notice period under the Old Code, and means that landowners need to keep any telecoms agreement at the forefront of dealings relating to their land.
The process does not end at termination. A landowner requiring vacant possession of the site must serve an additional notice on the operator calling for removal of the assets within a reasonable timeframe. Only after an additional 28-day period can the site provider apply to the court for an order for removal of the assets.
Security of tenure should also be considered, because if the New Code applies (for example, any new arrangement or any subsisting lease contracted out of the 1954 Act security of tenure provisions) then operators enjoy more favourable rights to hold over and for renewal of the arrangement following expiry of the telecoms agreement.
As the New Code is still in its infancy, termination-based litigation under the New Code has not yet emerged.
Conclusions and considerations
By regularising the relationship between site providers and operators, the New Code in many ways simplifies the formalisation of telecoms arrangements. However, through emerging case law it is clear that the New Code has tipped the balance in terms of negotiating power away from landowners and significantly towards operators. Landowners therefore need to approach these agreements with caution in order to protect their interests.
Insofar as the power of the UT to impose an agreement is concerned, the anxiety of landowners has been confirmed by the decisions of the UT. Opposition to the imposition of a New Code agreement can only be achieved with a robust case. Insofar as the anxiety about value is concerned, this has not been borne out to the same extent; whilst the no scheme valuation may result in lower annual rents, it will not do so as drastically as owners feared.
Landowners who have telecoms apparatus on their property under existing formal or informal arrangements, or who have been approached by operators seeking access to the land for surveys and new telecoms leases, should seek legal advice to ensure that they understand their rights under the New Code and to secure a telecoms agreement that does not unduly burden their property.
If you are seeking expert advice on your rights and/or options under a subsisting agreement or proposed New Code agreement, then please get in touch with James, Lillee or Nicholas.
 Lewison J in Bridgewater Canal Company Ltd v Geo Networks Ltd  EWHC 548 (Ch), para.7
 Department for Culture Media and Sport, Consultation Document – Reforming the Electronic Communications Code (26 February 2015)
 EE Ltd and another v The Mayor and Burgesses of the London Borough of Islington  UKUT 53 (LC)
 CTIL v University of London  UKUT 356 (LC)
 CTIL v Compton Beauchamp Estates Limited  UKUT 0107 (LC)