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Electronic Communications Code 2017 – Termination of Pre and Post 2017 Code Arrangements – The Implications for Landowners

11 December 2018 #Real Estate


The Electronic Communications Code 2017 (“the New Code”) came into effect on 28 December 2017 with the aim of making it easier for operators to obtain and secure certain rights. This was motivated by the Government’s wish to speed up the roll out of broadband and mobile network coverage across the UK, accepting that digital access is no longer considered a luxury but a necessity in line with other utilities.

The Electronic Communications Code 2017 (“the New Code”) came into effect on 28 December 2017 with the aim of making it easier for operators to obtain and secure certain rights. This was motivated by the Government’s wish to speed up the roll out of broadband and mobile network coverage across the UK, accepting that digital access is no longer considered a luxury but a necessity in line with other utilities.

The New Code allows for rights to be acquired by operators by both written agreement and agreement imposed by court order.

While the New Code changed the position in respect of many things such as quantum of consideration, assignment, sharing and upgrading (see our update of June 2018), it is the issue of termination of arrangements between landowners and operators that this article will consider.

Termination Provisions

Arrangements within the scope of the New Code no longer attract the security of tenure provisions provided for by the Landlord and Tenant Act 1954 (“the 1954 Act”) (this is assuming that any agreement has the primary purpose of granting rights under the Code). Instead, on contractual expiry or termination, a New Code agreement continues until determined in accordance with the New Code.

Landowners’ Compliance

To comply with the New Code regarding termination of an agreement, a landowner must give an operator a notice in the form prescribed by Ofcom and which gives at least eighteen months’ notice.

 The notice must also specify one of the four statutory grounds for termination. These grounds include

  1. substantial breaches by the operator of its obligations in the Code agreement
  2. persistent delay by the operator in making payments under the Code agreement
  3. when the landowner intends to re-develop the land. This appears to be similar to ground (f) under the Landlord and Tenant 1954 Act and is likely to be the most frequently used ground;
  4. The operator is no longer entitled to the agreement because the paragraph 21 test is not met (see below).

The test referred to in the fourth ground above is as follows: where the parties cannot agree terms a court can impose the New Code on a landowner where (a) financial compensation is adequate to overcome any prejudice caused to the landowner; and (b) where the public benefit to the New Code rights being granted outweighs the prejudice to the landowner. The method of calculating compensation and rent is now to be by reference to the open market value of the land without the telecoms equipment i.e. the ‘no scheme’ valuation.  This is likely to supress rental income, particularly in relation to roof top leases where there are few other competing uses. As a result, financial compensation seems very unlikely to be treated as adequate.

Intention to Develop

What amounts to an intention to develop under ground 2 above? There is no definitive definition given in the New Code although the Ofcom Code of Practice does seem to offer some guidance and suggest that the landowner should produce evidence of a “genuine” intention to develop. Further guidance pursuant to case law is awaited.

Operator’s Counter-Notice

An agreement will terminate on the date stated in the landowner’s notice unless the operator serves a counter-notice within three months of the landowners notice and then applies to Court for an order within three months of giving the counter-notice.

New Agreements

Any landowner entering into a new agreement will be subject to the termination provisions of the New Code. Any attempt to exclude these will be void.

Pre-Existing Agreements

The position in respect of arrangements in place prior to 28 December 2017, the date on which the New Code came into effect, is a lot less clear and a lot more complex.  The New Code imposes some, but not all, of its provisions on pre-existing agreements.

In the case of the termination provisions, the New Code provisions are to apply to pre-existing agreements except for any agreement which has the protection of the security of tenure provisions of the 1954 Act or any agreement which does not grant Code rights as its primary function and is contracted out of the 1954 Act. In some cases, the eighteen months’ notice period referred to above may be reduced to three months. This may come as a shock to many landowners who entered into Code agreements prior to 28 December 2017 and consider that their termination requirements are governed by any agreement and the provisions of the Electronic Communications Code 1984 (“the 1984 Code”).

Conclusion

For a landowner to gain vacant possession from an operator, the landowner will need:

  1. to wait at least 18 months (save in the case of some pre-existing agreements where the wait will be at least three months); and
  2. must also be able to show one of the grounds for termination.

This is a significant move away from the provisions of the 1984 Code which allowed for a twenty-eight day notice period. In particular, landowners will need to bear this additional time-frame in mind in the event of any planned re-development of land affected.

 

Clarkslegal, specialist Real Estate lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Real Estate matter please contact Clarkslegal's real estate team by email at realestate@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.
Disclaimer
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full General Notices on our website.

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Rachel Krol

Rachel Krol
Partner

E: rkrol@clarkslegal.com
T: 020 7539 8068
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