Episode 2: Quick Flash on the Electronic Communications Code 2017

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Michael

Hello and welcome to this episode of the Sharpe Five podcast series. I'm Michael Comba and joining me today is Tristan Salter, a barrister at Five Paper who specialises in property and insolvency law matters, and Lillee Reid-Hunt from our commercial property team here at Sharpe Pritchard, with a particular specialism in telecommunication matters, which is handy because today we're talking about the Electronic Communications Code 2017 and in particular how it works for landowners.

So, Lillee, what did the 2017 Code change for landowners?

Lillee

Thanks, Michael. The Code was a real shift in emphasis, treating occupation by telecoms networks in a not vastly different way from commercial tenants. It was the stated intention of the 2017 Code to swing the balance further in favour of operators over landlords or landowners. and hope that competition between operators would result in wider coverage at ever lower prices for the general public. Should we just pause there to explain some of the language around the code, Tristan?

Tristan

Yes, thank you, Lillee. It does get a bit complicated because the same words get used in different scenarios. But first, we have the operators. These are, as you guessed it, operating the actual apparatus that is going to be installed, the masts and things like that. They have obtained a direction from Ofcom, which is a publicly available list of people. So, it's a small group of companies who are installing these masts on different portions of land.

Then, you will next hear a lot during this podcast, the term code rights. Essentially, this is a broad range of rights which operators can seek to get over land, and they range from inspection, installation, and even cutting back trees which may interfere with the equipment.

And lastly, and importantly for landowners, we have the definitions of landowner within the code, and that's a person with an actual interest in the land as defined under Paragraph 37, and occupiers, which is subtly different, and they may not have a proprietary interest, but may be in occupation under a licence or the same.

Michael

And I guess it's not just a battle of access to the land, it's presumably also about money. Can you explain what a no-network valuation is?

Lillee

Yes, as it often does, it comes down somewhat to a battle of finances. So, a landowner is entitled to consideration for the imposition of a code agreement, and that equates to a rent for the privilege. However, it's not just an open market rent. The 2017 Code introduced a concept of the no-network valuation under para 24 of the Code. And this is similar in principle to what you'd see in compulsory purchase law, where property is valued as if the proposed scheme would never exist. The new Telecoms Code says that the consideration should be an adapted version of market rent, which A, does not take into account the use of the site for the provision of electronic communications, and B, does not factor in the Code's statutorily imposed rights for operators to upgrade, share, and assign.

So, in effect, it has driven down the cost of notional rent for access to these sites. But much of the mystery is now gone, since enough case law has now developed on this no-network principle for there to be a starting point valuation assumption, or assumptions, based on the nature of a particular site. So, for example, the three-stage valuation approach for existing rooftop site known as the Maple House valuation. So, subject to site specifics and your valuer's advice, probably for a commercial rooftop, the rent is likely to attract only around 5k per annum.

Also, I think Tristan will touch on this, but it's worth just flagging here that there are now no loopholes in the legislation that allow landowners to circumvent these rates that have been depressed by the no-network principle. even in the case of renewing legacy agreements equally to new code agreements.

Michael

So, if I am a landowner, how exactly can I respond to a claim where an operator seeks code rights?

Lillee

So, the first thing is certainly early engagement. As I said earlier, there has been a shift to a more permissive approach from Parliament, and the courts will not look favourably on a landowner who has acted obstructively or refused to engage. The first thing a landowner is likely to receive is a request for an MSV, or Multi-skilled Visit, from an operator. This is essentially a request for an early survey of a site to assess whether it's viable for that operator's infrastructure.

An operator can seek access for an MSV on an interim basis under Para 26 of the Code. And often they'll take a blanket approach of trying to get quite a wide range of rights at that time, irrespective of the nature or sighting of the property. So, by way of example, in 2021, there was a case, Cornerstone Telecommunications Infrastructure Limited v St Martins Property Investments Limited. Here, the operator sought interim code rights for an MSV, which included an intrusive survey. The Upper Tribunal agreed, in part, with the objections of the landowner, who highlighted that the property had a particular coast on it, which might be hard to reinstate. And so, in the context of this temporary MSV, the burden of the right sort was not proportionate. The tribunal said that the operator should be able to do non-intrusive works under the MSV to see if the building was viable for its network, and that would be sufficient. It's worth noting though, that even where interim rights are agreed or ordered, there is no assumption that permanent code rights will or should be given in future. So, the point is you do need to engage but do so carefully.

Tristan

Yeah, I would completely agree with that, Lillee. I see too many people burying their head in the sand about an MSP, hoping that the problem will go away. The timescale is short. They can give you a notice and then seek a tribunal ruling just after 28 days. Obviously, with the tribunal proceedings starting up, then costs start racking up. It makes a real difference if you engage early with people to deal with the problem of an MSV.

So, one of the biggest factors and concerns that landowners can sometimes have is when remediation works are currently taking place to their own building and whether or not a code right is going to interrupt those works. This is even more important because of the fact that operators obviously love very tall buildings to stick their masks on top of. Very tall buildings, unfortunately, are the focus of the Building Safety Act 2022. And there are several different factors to take into account when considering high-rise buildings. There may be cutting works still ongoing after the Building Safety Act and safety case reports to update. You will have to engage with the operators even though you have some concerns. And it'd be important to get expert evidence into the effects of any installation on your cladding system or on your fire risk report. Those are updates that are necessary, but you will need to provide proper evidence if you need properly evidenced, not just a blank assertion that we have cladding, or remediation works ongoing that will stop either an MSV or permanent rights.

Lillee

So, you need to take the site and the peculiarities of it into account, but outright objecting to the imposition of code rights is difficult and it can be expensive. If you're seeking to oppose an interim MSV or permanent rights, including on the often-used redevelopment grounds, it will be necessary to take specialist advice. There is a slightly different threshold that applies to MSVs and to permanent code rights, with the threshold being lower for an interim MSV, since these are temporary rights. But, in either case, you can't just assume that you can fall back on redevelopment as an excuse for objecting to code rights.

In a case reported this year, for example, Icon Tower Infrastructure Ltd v On Tower UK Ltd. The site provider had a conditional intention to redevelop, and this failed the code’s paragraph 20 test. This was an interesting battle between 2 operators, with one being the site provider. So, Icon were hoping that major mobile network operators would migrate to use their mast and would therefore upgrade the said mast as part of that arrangement. The upgrade, they were arguing, was works of redevelopment that would be sufficient to oppose code rights. The case upheld that the test to prove redevelopment under Section 30 (1), Ground (f) of the familiar Landlord and Tenant Act 1954 applies equally to the redevelopment ground in the Code. The decision was upheld, even though there was an undertaking from a parent company to undertake and indeed fund the works, but this was not enough to prove a formed intention required for the redevelopment ground, since the works were still entirely conditional on Icon first securing mobile network operator migration, which it did not have.

Tristan

Yeah, I completely agree again. Any dispute with operators has to be very carefully focused. It has to have a laser-like precision. So, as I mentioned, you might have a concern over the Building Safety Act and cladding or remediation works. you will need some degree of evidence, probably in the form of expert evidence, to say why that site is going to be impinged upon by this mast, or why some safety concern means that you can't have that works there. Now, operators will listen to that, but at the end of the day, that'll be tested by the tribunal. So, you have to have that evidence quite quickly at hand. Otherwise, things can get quite expensive. Because, as Lillee started this whole podcast with, the whole ethos of the 2017 Code is to provide more network coverage. And we're on our mobile phones more and more. It's necessary that we have more and more masts. And they are bringing down the costs of mobile communications, but that does mean more sites are going to be impinged.

Michael

Andrew, do you think there's been any kind of major controversies in relation to the Code?

Tristan

I think the biggest confusion when the Code was first introduced was the status of older leases, which had protections under the 1954 Act. You'll probably be all well aware of the 1954 Act and the protection it gives for business owners. The 2017 Code ended the automatic protection a commercial lease would get under that Act. This led to confusion and debate among lawyers.

Essentially, those agreements that predated the code had to be extended within the county court under the 1954 Act. Those renewals were likely to be more flexible and provided for more generous valuation regime to landlords. This debate went all the way to the Supreme Court in 2022, where it was held that an operator who was in occupation under a 1954 Act tenancy had to apply under that Act to renew its lease. This debate still goes on, even though we are nearly a decade after the Code was introduced.

In the case of EE Ltd v Clocktower Investments Ltd, the Upper Tribunal found that land, which was meant to have apparatus built upon it, but had actually never been built upon, actually meant that an operator had occupied a site, they had created an easement over this land to run up cables and to access what was, indeed, a clock tower, and therefore they had to renew their lease under the 1954 Act. This really was all about rental valuations. As Lillee said, the no-network assumption meant that rental valuations have been depressed. Under the 54 Act, they aren't so depressed. For me, it shows the complexity of the 2017 Code. It cannot be divorced from land law, which has built up over centuries and causes particular confusion when, as the Code does, it intervenes in some basic principles, for instance, that a landowner is completely free to control what happens on their site. It's only from the 7th of April this year that the position has been changed by new legislation and any 1954 Act renewals of a Code agreement will have the no-network assumption embedded into them, even though they're under the County Court and the 54 Act.

It's also interesting to note that the Upper Tribunal has been bored by these cases and they are now being heard at the first in the first-tier tribunal. That really is because a lot of the complexity has now run through these cases through the emerging and developing case law.

Michael

And I suppose we're looking at about 10 years since 2017, believe it or not. What happens to when these agreements end?

Lillee

So, as we've just heard from Tristan, the words you've used there, agreements end, is somewhat of a misnomer because even if the contractual term of the agreement ends, the code gives operators statutory protection to remain in situ beyond the expiration date. What this means in practice is that you need to be savvy about how you can actually end these agreements even before you enter into them, to ensure that you're future-proofing your site to the greatest extent possible. If you're now looking at ending an existing agreement, site providers need to understand that there are only limited, prescribed statutory grounds that you can rely on to terminate. We've talked only about one of them, the redevelopment ground.

You also need to understand there are long notice provisions. You'll need to take account of these in any redevelopment program or other time scales you're working on or working to. And there is a wholly separate subsequent statutory process to actually enforce removal once you've successfully terminated the code rights. So, look, termination and removal is, it's really a whole episode, I think, in itself.

And I think that Tristan and I could talk to this particular very important part of the code in a follow-up podcast if people were interested. So, we'd love to hear some feedback, and we can look at doing a dedicated termination discussion if that is of interest.

Michael

Well, that leaves me to say thanks very much, Lillee and Tristan, into what was a very detailed guide onto the Electronic Communications Code 2017, and I'm sure listeners will be very interested to hear about termination. Thank you all of you to listening to the Sharpe Five podcast episode and see you next time.