The New Electronic Communications Code – Considerations for Landlords

The New Electronic Communications Code – Considerations for Landlords

The substantive provisions of the new Electronic Communications Code (“Code”) will come into force on 28 December 2017, following the passing of the Digital Economy Act 2017 (Commencement No. 3) Regulations 2017.

The Digital Economy Act 2017 is intended to demonstrate the government’s commitment towards the UK’s rapidly advancing digital industry in a post-Brexit economy. Matt Hancock (Minister of State for Digital) stated that the new Act would “remove outdated restrictions” in current legislation, whilst Mark Talbot (Chair of the Royal Institute for Chartered Surveyors Telecoms Forum Board) commented that provisions within the Act enabled “investment in national digital infrastructure whilst balancing the needs of the public, and private property owners”.

However, questions have already been raised about whether the new Code does indeed strike the desired balance and there is a suggestion that the removal of the so-called ‘outdated’ restrictions, could in fact benefit the multinational telecommunications tenants that occupy the sites more than the landowners of telecoms sites around the country.

The Existing Code

The existing Electronic Communications Code was brought into effect during the mid-1980’s with the express purpose of statutorily protecting tenancies of emerging telecommunications firms. With the exception of some modifications made by the Communications Act [2003], the law has remained largely unchanged until now.

The existing code granted a variety of rights to ‘operators’ – (telecoms companies registered with Ofcom), including the statutory right for operators to install and maintain electronic telecoms equipment, and a form of ‘security of tenure’ under the Code.

Much like the security of tenure provisions under the Landlord and Tenant Act [1954] (“LATA”), the Code enabled operators to retain their equipment on the land following the expiry of a contractual tenancy period. If a Landlord wished to remove an operator under the existing code, they had to trudge through a laborious notice procedure – and even then could find their removal request rejected if, on an application to the Court, the operator was able to successfully argue for the right to retain their equipment on site.

Telecommunications Lease disputes are surprisingly rare, which would suggest that most disputes are settled by commercial negotiation before they reach the Courts. In the case of Crest Nicholson v Arqiva Service Limited [2015], the Court was reluctant to interpret the Code against the operator – even more so when there was a clash between LATA and Code provisions.

Whilst the existing code did allow landlord’s to exclude the effect of some provisions of the Code when entering into tenancy agreements with operators, the ultimate provision (under Para.21 of the Code) to remove the tenant could not be excluded.

The New Code

On an initial review of the new Code, there appears to be an undoubted shift in favour of operators. There are numerous changes under the new Code, and some of the key ones are summarised below:

  • Interaction with the LATA – the new Code provides a clear distinction in what was previously a grey area of law. An agreement which is intended to be for the leasing of a telecommunications site will fall firmly under the Code, and an agreement which is intended to be a business tenancy (for which the lease of a site for telecommunications purposes is ancillary) will fall under the LATA.
  • Valuation Changes – under the existing code, the amount of rent payable to landlords is calculated according to what is ‘fair and reasonable’ – arguably to the benefit of the landlord. The new regime brings in a ‘no scheme’ valuation, in which land is now assessed on its value to the landowner and not the operator. Ultimately, this is likely to drive down rent costs for operators.
  • Removing Operators from the land – removal is likely to be more drawn-out than under the existing code. The landlord must serve notice at least 18 months in advance of the required / proposed removal date – which may well be to the detriment of landlords with short-term development plans.
  • Site Sharing – under the new Code, operators can upgrade, share and alter telecoms sites with other operators without the consent of the landlord, and assign leases without consent, regardless of the terms of any written agreement.

The New Code – Commercial Considerations

In light of the changes being introduced by the new Code, landowners affected by existing telecoms leases or contemplating the grant of a new lease may be wise to consider the following:

  • Negotiations – current operators may tactically seek to terminate existing agreements with a view to pushing towards renewals that benefit from the provisions under the new Code.
  • New Ventures – if a landlord has been approached by an operator/telecommunications company to enter into an arrangement, they would be wise to weigh up the commercial benefits of doing so, especially in light of valuation and site sharing changes (as per above).
  • Development – landlords looking to develop their land should approach telecommunications agreements with a degree of caution. The temptation of continual trickling rent may be appealing, but should be considered against any large-scale development plans.

The above is intended as a commentary on the new Code due to be introduced later this month, not legal advice.  You should always discuss your individual circumstances with a legal expert before you assess the impact on your business or property investment, as the rules and regulations are complex and cannot be covered in full within the scope of this article.

If you would like to discuss the matters raised in this article, please contact Commercial Property Solicitor, Shona Dunning, on 01494 478627 or Property Litigation Solicitor, Alex Wyatt, on 01494 478676.