The Effect of the New Electronic Communications Code on Landowners

Land
posted by GRichardson

The Electronic Communications Code (“the Code”) was initially introduced in 1984 to provide a statutory basis for telecommunication companies to place landline telephone equipment on third party property and amended in 2003 to include all electronic communications.   The Code regulates the relationship between landowners and network operators.  As a result of the desire to allow for a greater coverage and a better quality of service for consumers, a revised Electronic Communications Code has been produced as Schedule 1 of the Digital Economy Act 2017 which received Royal Assent on 27th April 2017 and came into force on 28th December 2017. The new Code is intended to relate to new agreements rather than pre-existing ones although there are some transitional provisions in Schedule 2. The new Code is significantly longer than the existing code.

Disadvantages for Landowners

One of the major changes in the revised Code relates to the valuation basis of payments.  It was considered correct that landowners should receive a fair payment for the use of their land.  However, the new Code does not intend for this payment to reflect public demand for electronic services (which may have seen rents rocket) as this would be disproportionate to other utility services.  Rather, it is intended to limit the payment so that it reflects the underlying value of the land and will be calculated on a 'no scheme' basis (which effectively artificially ignores the existence of a telecoms lease and the Code rights).  This is bad news for landowners as this new valuation system may well decrease the rent that could previously have been demanded. 

In addition, the Government considered that regular upgrading of electronic communications was essential and that sharing networks would allow operators to make a much more effective use of sites. As such, the new Code grants rights to operators to upgrade and share apparatus without requiring the landowner’s consent (even if that is contradictory to the written lease agreement) and without the operator having to make further payments to the landowner as long as there is no adverse impact or additional burden on the landowner.

The new Code also allows an operator to assign its lease agreement to another operator despite any contrary prohibitions/conditions in the written lease agreement. However, the landowner is entitled to require something similar to an Authorised Guarantee Agreement from the outgoing assignor as a condition of that assignment

The new Code is compulsory so parties are not permitted to “contract out“ of the new Code. If the operator does enter into an agreement purporting to opt out of the Code then this will be unenforceable.

Advantages for Landowners

One advantage for the landowner is that the revised Code will bring an end to the security of tenure protection afforded to the operator by the Landlord and Tenant Act 1954.  New telecoms leases will only be afforded protection by the Code itself.  This will be a welcome change for landowners who will no longer need to exclude the security of tenure provisions provided for by that Act. 

After the Lease term has expired, the landowner can terminate the agreement but has to serve an 18 month notice on the provider citing one of four grounds (including redevelopment and substantial breach of obligations) and must follow a set procedure, subsequently applying for a Court Order if necessary.

Another advantage for landowners is that they can now require removal of apparatus where one of five conditions are met (including where the Code rights have ended or where the apparatus is no longer used in connection with the operator’s network).  Again, the landowner is required to serve a notice on the operator to remove the apparatus and make good the land within a reasonable period. If agreement can’t be reached then application can be made to the Court.

Conclusion

As you can see, the Code will significantly change the current position on new telecoms lease agreements and provide more disadvantages than advantages to landowners. Rental values are likely to be reduced and the new Code will override any contradictory provisions entered into e.g. relating to upgrading and sharing of apparatus, and assignment etc. The parties cannot “contract out” of the Code so even if the operator voluntarily enters into a new agreement excluding or amending any of the Code rights then those provisions will be unenforceable.  Landowners will on the other hand benefit from the lease agreements not being protected by the 1954 act and the ability to force the operator to remove equipment.

However, rather than help facilitate the expansion of mobile and broadband networks as intended, the new Code may in fact have the opposite effect if landowners regard the new agreements to be more of a burden on their land than a benefit.

The main provisions of the new Code are covered in the Government publication: “A New Electronic Communications Code”, which can be found by clicking here

Please contact us if you would like more information about the issues raised in this article or any other aspect of commercial property law at 02920345511 or commercialproperty@berrysmith.com 

Communications

Martin Pursall

Commercial Property Partner, Berry Smith Lawyers