The New Electronic Communications Code – Deal or no deal?
21 March 2019
The first case in England to consider the effect of the consideration and compensation provisions of the 2017 Electronic Communications Code (“the Code”) has recently been reported (EE Ltd and another v London Borough of Islington (“EE”)).
The Code gives operators rights to install and operate communications apparatus on, under or over land owned by third parties.If the operator and occupier should fail to agree terms, these may be imposed by the Court, including what the appropriate consideration or rents payable by the operatorshould be. This will be calculated as the market value subject to certain conditions: -
- It must reflect the underlying value of the occupier’s land only (the fact that the land may in fact be used for electronic communications either by the operator or a competitor of the operator must be ignored);
- The operator’s rights to assign, upgrade and share the Code right will also be ignored;
- The right must correspond to the Code right; and
- The operator will be deemed to have an alternative site it could use.
In EE, the operator sought to locate equipment on the roof of the occupier’s block of flats.Agreement was not reached so the operator applied to the Court to have an agreement imposed on the occupier.
Parties are free to agree whatever terms they might choose however if agreement cannot be reached the Court will apply the valuation criteria set out above.Regard may however be had to rents obtained for uses outside of Code rights.The market value could be nominal or not depending on the characteristics and potential uses of the premises.
In reaching the rent the court considered the obligations that any lease would impose upon the occupier (e.g. restriction of use of parts of the building, obligation on the occupier to keep certain parts of the building in repair for the benefit of the operator).The court also thought it appropriate that the operator should contribute to the service charge.The rent awarded was £2,551.77 per annum, the figure proposed by the operator, however the court held the annual market rent by applying the valuation criteria to be £1,000.00.
The occupier was entitled to reasonable legal and valuation expenses for attempting to agree the lease and compensation for use of other parts of the building during the installation of the equipment.
It appears that the valuation criteria in the Code will have a depressing effect on rents imposed by the court.It might therefore be prudent for occupiers to strike a deal with operators in advance of an application being made to the Court.Conversely, operators may hold out and rely on the Code to reduce the rents payable, potentially making recourse to the courts a far preferable option.
Niall is an Associate in our Real Estate team and regularly advises clients on the application of The Electronic Communications Code 2017 to land.