Two recent cases involving telecoms leases will be of interest to landowners and mobile network operators alike, offering guidance on the renewal of existing agreements under the electronic communications code.

 

What is the code? 

The code gives network operators certain rights to install, maintain and operate electronic communications apparatus, such as masts and antennae, on land. The new code was created with the passing of the Digital Economy Act 2017, and came into force in December 2017. The previous code was set out in the Telecommunications Act 1984, which pre-dated the introduction of mobile networks in the UK. 

According to Explanatory Notes to the 2017 Act, the valuation regime in the new code ‘ensures property owners will be fairly compensated for use of their land, but restricts their ability to profit from the public need for communications infrastructure’, and gives the telecoms sector a similar status to utilities like electricity or water, with the aim of improving network coverage.

 

EE Ltd v Duncan 

In EE Ltd and Hutchison 3G UK Ltd v Duncan [2021] CSIH 27, two companies (EE and H3G) appealed the Lands Tribunal for Scotland decision (2021 SLT (Lands Tr) 1) dismissing the application by the two companies to terminate an existing agreement (a lease) under the old code and replace it with a new agreement under the new code. The original term of the lease had expired in 2012 and it had continued from year to year by operation of tacit relocation – a Scots law rule whereby leases are renewed on the same conditions if neither party serves an appropriate and timely notice of termination. 

In determining whether to grant an agreement under the new code, the tribunal considered that it must have regard to ‘all the circumstances of the case’ as well as the requirements specified in the new code, including ‘the operator’s business and technical needs’. The tribunal took the view that Parliament had ‘set the bar as high’ when assessing the ‘need’ for a new code agreement and that EE and H3G did not clear that bar, there being ‘no suggestion that any change is required in order to give [the agreement] business or technical efficacy’. The tribunal decided that the application by the two companies did not sufficiently outline any particular site-specific justification or need for a new agreement, and refused the order seeking a new code agreement. 

On appeal, the Court of Session (Inner House) disagreed with the tribunal’s interpretation, stating that it wrongly inserted a ‘high bar’ into its assessment and placed too much significance on the term ‘needs’. According to Lord Malcolm, delivering the court’s opinion: ‘Parliament has identified certain minimum code rights for operators, including sharing/upgrading abilities …. The view was taken that these are required if network operators and infrastructure providers are to be in a position to deliver the modern low cost electronic communications system which Parliament wants and which business and the public at large expect.’ 

He added: ‘Given the underlying aims and purposes of the new code, which include that over time old agreements will be brought into line with new ones, we understand the phrase “business and technical needs” … to be a generic term which, whatever else, includes the benefits for operators mandated by the new code. We agree with the operators’ submission that it can be construed as a reference to matters which are reasonably required from a business and/or technical point of view.’ 

The Inner House allowed EE and H3G’s appeal, quashed the tribunal’s decision and sent the application back to the tribunal for further procedure in accordance with the guidance and timescales in its judgment; the result of which will be that a new code agreement will have to either be agreed between the parties or will be imposed by the tribunal where the parties cannot reach agreement between them.

 

EE Ltd v Stephenson 

South of the border, in EE Ltd and Hutchison 3G UK Ltd v Stephenson and AP Wireless II (UK) Ltd [2021] UKUT 167 (LC), EE and H3G were tenants under an existing code agreement (lease), which had been granted before the 2017 Act came into force and had expired by effluxion of time in 2019. EE and H3G served 2017 code notices on the landowner seeking to terminate the existing lease and replace it with a new agreement conferring 2017 code rights on them. The parties could not reach agreement as to the terms of a new lease, so the matter was referred to the Upper Tribunal of the Lands Chamber where the following key points were decided by Fancourt J:

  • The Scottish Court of Session (Inner House) decision in EE Ltd v Duncan applied in England and Wales.
  • The court should decide what order to make, taking into account all the circumstances, including the terms of the existing agreement as well as the factors in the new code (including the requirement to have regard to ‘the operator’s business and technical needs’), and only then should the court specify the terms of the new code right or new agreement.
  • If an operator serves a 2017 code notice on a landowner proposing termination of an existing agreement and it being replaced with a new agreement on terms annexed to the notice (in the Stephenson case, EE and H3G had attached their standard greenfield template lease to their 2017 code notices), the operator cannot use the court process to modify any of the terms of the proposed new agreement and seek to secure different terms that have not previously been negotiated by the parties. In such instances, either a fresh notice has to be served by the operator or the landowner has to agree to waive the requirement for a fresh notice.

 

Implications for landowners 

These recent decisions in the operators’ favour will prove a great frustration for landowners with mast sites located on their land, who can expect to see an increase in the number of code notices being served in order to terminate leases running under the old code and replace them with new agreements conferring 2017 code rights. 

Landowners should take specific advice in relation to questions arising from their telecoms leases and/or upon receipt of any code notices to ensure that they are given the correct advice as to the implications of the code for their existing or future telecoms lease arrangements.

 

Looking ahead 

Earlier this year, the UK government consulted on changes to the code, as it believes that certain areas of the code are not operating in the way that was originally intended. 

The areas of particular concern are:

  • Issues relating to obtaining and using code agreements. The proposals are intended to support faster and more collaborative negotiations, help ensure best practice guidance is adhered to, provide efficient ways for disagreements to be dealt with, address failures to respond to requests for code rights and ensure that completed agreements can operate effectively.
  • Rights to upgrade and share. The government proposes to review when the automatic rights to upgrade and share should be available and how they might be clarified. The proposals also look to clarify the position where the conditions for the automatic rights to upgrade and share are not met, and to consider the benefits of introducing limited retrospective rights to share where equipment was installed before December 2017.
  • Difficulties relating to the renewal of expired agreements, where there is a need for greater certainty about what happens when an agreement comes to an end and greater consistency in the way that disagreements about the renewal of code rights are dealt with. 

The findings of the consultation have yet to be published and we will provide a further update in due course once the details are released. In the meantime, there is no doubt that decisions from the courts/tribunals will continue to develop and shape the way forward.

 

Further help 

For more information on telecoms leases, please contact us on 0131 228 8111 or through the website.