Welcome to the latest Burges Salmon Electronic Communications Code Case Law Update. This quarterly newsletter will tell you all you need to know about the key cases involving the Code and why they are important.
This edition includes an overview of the proposed changes to the Code as well as three decisions from the Court of Appeal, Upper Tribunal and County Court which concern the extent of operators’ rights to upgrade and share, the valuation of water tower sites and the assessment of rent under the Landlord and Tenant Act 1954.
2017 Electronic Communications Code New Changes – What You Need to Know
On 24 November 2021, the Government published its response to the “Access to Land: consultation on changes for the Electronic Communications Code” (“the Consultation”) along with the initial draft of the Product Security and Telecommunications Infrastructure Bill (“the Bill”). Part 2 of the Bill provides for various modifications to be made to the 2017 Electronic Communications Code (“the Code”) and associated legislation.
The response to the Consultation is unsurprising, in that responses to the questions posed appear to have largely followed party lines. Operators generally supported wider rights, quicker, more flexible procedures and less formal requirements, with site providers favouring an enforceable code of practice for operators, more certainty in relation to ongoing agreements and no further expansion of operators’ rights. As noted in the Bill’s 24 January 2022 briefing paper, this has resulted in opposing views on the proposed changes.
As a result of the consultation outcome, the Bill provides for a wide range of legislative changes. Whilst these are not yet technically law, the Bill is due to complete the committee stage by 29 March 2022 and it seems likely that many of these changes will be implemented in the upcoming months.
The proposed changes are considered in more detail here.
On Tower UK Ltd v JH and FW Green Ltd – 7 December 2021
Key points:
- In a renewal of an agreement under the Code, the importance of the terms of the existing agreement would depend on the extent to which these terms were consistent with the purposes of the Code.
- The Tribunal can grant wider rights to share and upgrade than contained in Paragraph, 17 if an operator can demonstrate that such rights were required. It is not necessary for such reasons to be compelling or striking.
This was an appeal of the first instance decision (often referred to as “Dale Park”) which concerned the terms of a renewal Code agreement. At first instance, the Tribunal had granted On Tower unlimited upgrading and sharing rights under the new agreement, notwithstanding a request by the site provider that these rights should be limited by the conditions at Paragraph 17 of the Code and the fact that such rights were more limited under the pre-existing agreement. The site provider appealed.
The Court of Appeal found that the significance of Paragraph 34(12) of the Code (which requires the Tribunal to have regard to the terms of the existing code agreement when specifying the terms of a renewal agreement) would depend on the extent to which the terms of the existing agreement were consistent with the aims of the Code. Because the existing lease provided for more restrictive rights to upgrading and sharing than permitted under Paragraph 17 of the Code, it was held that these terms were irrelevant to the terms of the renewal agreement.
In line with EE Ltd v Stephenson (see the Autumn 2021 Edition of this update) the Court found that the O’May principle (which applies in lease renewals under the Landlord and Tenant Act 1954 and puts the onus on justifying a change to an existing agreement on the party seeking the change) was of limited relevance to the Code.
Upholding the Tribunal’s decision, the Court found that the restrictions on upgrading and sharing in Paragraph 17 of the Code were only a starting point and that whilst it was for operators to explain why they required wider rights, they did not need to establish striking or compelling circumstances. In the present case the Tribunal was found to have been justified in imposing the terms sought by On Tower on the basis that a limit on the rights to share or upgrade would have caused extensive difficulties to On Tower, as a neutral host.
This case appears to settle the issue of whether Paragraph 17 represents a floor or a ceiling in terms of upgrading and sharing rights, which the Tribunal has not always approached consistently. Amendments to the Code which further clarify this point are due to be introduced by the Product Security and Telecommunications Infrastructure Bill.
EE Ltd and Hutchison 3G UK Limited v Affinity Water Limited – 17 January 2022
Key points:
- The Tribunal doubted the agreed assumption that the site should be treated as equipped for the purposes of calculating consideration in Code renewals and suggested that sites should instead be assumed to be vacant for valuation purposes.
- It was suggested that the established three-stage test for calculating consideration might not be necessary in future in light of more clearly established precedents from Tribunal decisions.
In this case, the Tribunal considered the consideration and compensation payable by the operator under a renewal agreement of an electronic communications site located on a reservoir and water tower.
EE had occupied the site under a subsisting agreement, which expired on 28 November 2017 and had been contracted out of the Landlord and Tenant Act 1954. After expiry of the agreement, EE served a Paragraph 33 Notice, requesting a new agreement. The parties had agreed all of the terms of the new agreement save for the compensation and consideration.
The parties agreed that, for the purpose of calculating the consideration, it should be assumed that the site was occupied and equipped. This was based on the fact that the site was equipped and the Code did not assume that sites were to be treated as though they were vacant.
However, the Tribunal questioned this position, as the hypothetical transaction was assumed to be conducted at arm’s length, which implied that the actual occupier had vacated the site and the incoming tenant was a hypothetical third party. This and the assumption that the site would not be used as part of an electronic communications network suggested that the occupier had taken any of its equipment with it. Whilst moot in the current case, this point may be relevant in future cases.
EE argued for consideration of £2,787 per annum with the site provider, Affinity Water Limited arguing for £6,560.84. The Tribunal awarded consideration of £3,300 per annum, with notable items including the burden of Affinity managing EE’s access to the site (£1,500 per annum) and the benefit of the water tower being maintained by Affinity (£350 per annum) which removed the need for EE to erect and maintain its own mast.
The Tribunal found that this valuation was consistent with the general pattern of Code valuations, finding that, in principle, the consideration for a water tower site should fall at the higher end of the difference between the consideration previously awarded for a greenfield site (£600 to £1,200) and an office rooftop site (£3,850). The Tribunal suggested that the emergence of patterns from previous Tribunal valuation decisions under the Code were becoming sufficiently clear that it should rarely be necessary in future to adopt the three-stage test for consideration established in previous cases.
EE Ltd and Hutchinson 3G UK Limited v Morriss and others – 7 January 2022
Key points:
- The test for assessing rent under 1954 Act set out in the Vodafone v Hanover Capital case need not be applied where there is sufficient comparative evidence of bare site lettings.
- The Court must assume that the letting is of a bare site, but need not assume the site would not be used for an electronic communications network.
This case concerned the renewal of the lease of an electronic communication site which was protected under the Landlord and Tenant Act 1954.
Whilst Vodafone Ltd v Hanover Capital had previously established a structured approach for assessing rent, Judge Martin Rodger QC (who also gave the Hanover Capital judgment) found that following this approach was not necessary in this case. This was because there was sufficient comparable evidence of new bare site lettings available. The Court found that, comparable evidence relating to the renewal of leases over existing sites was not informative, as the statutory hypothesis assumed the letting of a bare site. Accordingly, the Court found that it should not be assumed that an incoming tenant would be willing to pay additional rent to reflect the apparatus which had previously been on the site.
In line with the decision in Hanover Capital, the Court found that under the 1954 Act, it was not necessary to apply the assumption at Paragraph 24 of the Code, that the site would not be used for the purpose of providing an electronic communications network. However, the parties had to be assumed to have regard to the Code and be aware that the Code could be used to impose an agreement on the site provider if terms were not agreed. This point was made with the caveat that it should be assumed that the operator would want to avoid imposing rights under the protracted process under the Code.