WolfBite - the key takeaways
• The Electronic Communications Code gives network operators rights to install, maintain and upgrade communications equipment on land.
• After the end of the contractual term, Code agreements continue until terminated, modified or renewed in accordance with the Code.
• If the terms of a renewal agreement cannot be agreed, an application can be made to the tribunal to determine the outstanding points.
• The Code sets out the matters the tribunal should consider when determining the terms of renewal.
• The terms to be determined in Vache Farm were the circumstances in which the site provider could exercise a redevelopment break clause, and the consideration (rent).
• The tribunal decided that the break clause should not restrict the site provider’s intended redevelopment to non-telecommunications uses but, to strike a fair balance, it could only be exercised on or after the fifth anniversary.
• The tribunal reviewed the consideration payable for unexceptional small rural sites and increased it to £1,750 to reflect inflation and evidence of sites used for non-telecommunications purposes.
What is the Electronic Communications Code?
The new Electronic Communications Code (the Code) was introduced in 2017 as a replacement scheme, giving telecommunications operators statutory rights to facilitate the creation and operation of their networks.
The previous scheme was considered to be inadequate to support the roll-out of modern communications technology (such as 5G) necessary to drive economic growth, education and engagement with public services.
The Code confers various rights on Ofcom-approved network operators, including the right to install electronic communications apparatus (such as masts, cables and cabinets) on, under or over land, and to inspect, maintain and upgrade that apparatus.
Code rights can be acquired by an operator either by agreement with the owner or occupier of the land, or by applying to the tribunal.
The Code brought in procedural changes designed to allow disputes to be resolved more quickly, so that disagreements between operators and landowners do not delay the construction and maintenance of vital communications infrastructure.
Renewing Code agreements
As well as giving network operators Code rights in connection with the installation of new apparatus, the Code also provides for the statutory continuation of existing agreements and sets out how such agreements can be terminated, modified or renewed.
The provisions concerning the termination, modification and renewal of existing agreements are set out in Part 5 of the Code.
So far as the renewal of agreements is concerned, Part 5 enables either the network operator, or the site provider, to serve a notice requiring the other to agree that the Code agreement should be replaced by a new Code agreement.
The notice must set out the proposed terms of the renewal agreement.
A network operator’s notice must also contain information about the availability of alternative ways of resolving matters (for example, by mediation).
If the parties are unable to reach agreement, whether by negation or formal alternative dispute resolution process, either of them can apply to the tribunal to make an order.
The orders the tribunal can make are set out in paragraph 34 of Part 5 of the Code. These include ordering the parties to enter into a new Code agreement.
In determining whether to make such an order, the court must have particular regard to the operator’s business and technical needs, the use the site provider is making of the land and the amount of money the operator is paying under the existing agreement.
When it orders the grant of a renewal agreement, the tribunal can order the network operator to pay consideration (rent) to the site provider calculated in accordance with paragraph 24.
Broadly, consideration is the market value a willing buyer would pay a willing seller in an arm’s length transaction for the agreement on the terms imposed.
There are various statutory assumptions, including to disregard any additional value deriving from electronic communications use. This so-called “no-network” assumption prevents landowners sharing in the value created by the high public demand for communications services. This was a policy decision designed to keep rents down and, by doing so, encourage greater investment and improve network coverage.
Vache Farm
The site in this case was located at the edge of a grass field on a farm in Buckinghamshire.
The site measured about 16m x 6m. On the site was a 20m high steel mast with antennae and microwave dishes attached, and several cabins housing electricity and telecommunications apparatus.
The original agreement was entered between the owners of the farm and a network operator in 2005 for a term of 15 years.
EE Ltd and Hutchison 3G (EE) took an assignment of the agreement from the original operator in 2015. EE was therefore the network operator.
In 2018, the owner of the farm granted a 50-year lease to a company called AP Wireless (APW) that sat above EE’s agreement. This meant that APW became the site provider.
The dispute in this case was accordingly between EE, as the network operator, and APW, as the site provider.
The contractual term of the agreement expired in 2020, but the rights conferred by the agreement continued in accordance with the Code.
EE and APW agreed that there should be a new ten-year Code agreement and had agreed most of the other terms of the renewal.
There were only two remaining points in dispute.
The first was that, whilst it had been agreed that APW or any successor should have the right to terminate the new agreement on giving 18 months’ notice, they disagreed on the circumstances in which this break right could be exercised.
The second issue was the consideration to be paid under the renewal agreement.
Redevelopment break clause
It is worth explaining how APW’s business model works.
APW’s website says that it is one of the leading mobile phone mast site lease investment firms in the world.
APW’s business involves entering into leases with landlords of mobile phone mast sites, as it had in Vache Farm, which sit above the Code agreements. Under these leases, APW pays the landlord a lump-sum in return for the right to collect future rents directly from the network operators. It then seeks to add as many mobile phone operators to each mobile mast, to maximise the use of (and revenue from) each site.
APW is not itself an operator, but another company in the same group, called Icon Tower Infrastructure, is.
In this case, APW contended that the break could be exercised at any time, whenever the site provider desired to redevelop the site or any neighbouring land, or if the conditions that needed to be met for the tribunal to be able to impose a Code agreement could no longer be satisfied.
EE, on the other hand, proposed that the site provider should have to prove a settled intention (not merely a “desire”) to develop the site and that the break should only be exercisable on or after the fifth anniversary of the start of the new agreement. Importantly, EE sought to restrict the definition of “develop” so that it excluded development for the purposes of providing or operating an electronic communications network, services or infrastructure system.
This is where the nature of APW’s business model was relevant.
As the Judge explained, APW’s related company, Icon, constructs masts and towers on existing sites at which APW or Icon have acquired leases that sit above the operators’ Code agreements. These new masts and towers replace the infrastructure originally installed by network operators. Those network operators are then invited to relocate their dishes and antennae to Icon’s new mast or tower.
The reason why this was relevant is because Code rights are rights in relation to land. Installing equipment onto a mast or tower does not come within this definition. Attaching equipment to masts and towers is not, therefore, itself a Code right.
Accordingly, the price that companies like APW and Icon can charge network operators for allowing them to attach equipment to their new masts and towers is not regulated by the Code but determined by the market.
The tribunal in this case considered that it was not, however, the policy of the Code to stand in the way of the redevelopment of sites. It therefore saw no good reason to limit the break clause so that it could only be used if the intended redevelopment was for something other than telecommunications use.
There was, however, a balance to be struck between the site provider’s right to have the opportunity to redevelop the site, and providing the network operator with a reasonable period of security under the new agreement.
The tribunal determined that the appropriate balance was to allow the site provider to terminate the new agreement on giving 18 months’ notice expiring on the fifth anniversary of the start of the new Code agreement, or any subsequent anniversary, if it had a genuine intention to redevelop and could not reasonably achieve this whilst the Code agreement was continuing.
Rent
The approach to determining the consideration payable under a Code agreement has been the subject of numerous previous tribunal decisions.
In one of the leading judgments involving the renewal of a Code agreement, the tribunal included a table summarising the figures determined in earlier decisions for different types of property. The amounts ranged from £600 a year for sites in rural locations, up to £5,000 a year for residential rooftop sites. It hoped that the table would provide guidance on the levels of consideration parties could expect the tribunal to determine in other similar cases.
The rationale for giving guidance on the levels of consideration parties could expect was to manage the expectations of site providers and network operators, introduce a level of predictability into negotiations and, in doing so, reduce the number of contested cases that came before the tribunal.
In a subsequent case, the tribunal indicated that, in the absence of special features, a mast on a rural site that was not in close proximity to housing might expect to achieve £750 a year.
The tribunal in Vache Farm believed that the objective of encouraging parties to settle had largely been successful but considered that its mind should not be closed if a serious challenge, supported by evidence, was raised.
Having heard evidence from expert valuers on both sides, the tribunal was persuaded that the earlier figure of £750 for unexceptional rural sites was now too low.
The Judge considered that this figure should be increased both to reflect inflation and in light of evidence that it had analysed in detail for a variety of non-telecommunications lettings of small areas in rural locations (such as a meteorological station, a borehole site and noise monitoring compounds).
The tribunal concluded that the appropriate annual consideration for an unexceptional rural mast site was £1,750. This figure has already been applied in respect of 10 sites in a subsequent First-tier Tribunal case, also involving APW (On Tower UK Ltd v APW [2024]).
It did not update the table of guidance figures, but took the opportunity to emphasise the need for those in the market to adjust them to reflect the impact of inflation.
