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Getting rid of electronic communications apparatus

3 June 2014

What apparatus are we talking about?

Not just masts! The definition of “electronic communications apparatus” within the Code (at paragraph 1) includes:

  • any apparatus (within the meaning of the Communications Act 2003) which is designed or adapted for use in connection with the provision of an electronic communications network
  • any apparatus (within the meaning of that Act) that is designed or adapted for a use which consists of the sending or receiving of communications or other signals that are transmitted by means of an electronic communications network
  • any line
  • any conduit, structure, pole or other thing in, on, by or from which any electronic communications apparatus is or may be installed, supported, carried or suspended.

Section 405 of the Communications Act 2003 defines “apparatus” as including “any equipment, machinery or device and any wire or cable and the casing or coating for any wire or cable.”

Overview of protection under the Code

The general regime under the Code governs operators’ rights to get onto land in the first place and sets out the rights which an operator enjoys once its apparatus is installed there.

In view of the significant statutory protection offered by the Code, it is important that property owners (and indeed their tenants) are aware of the implications of granting rights to Code operators and the difficulties of removing their apparatus once it has been installed.

Under the general regime, an operator can get onto land in one of two ways:

  • by securing agreement in writing from an “occupier of land for the time being” (not necessarily the freehold or leasehold owner) under paragraph 2 of the Code;or
  • by serving notice under paragraph 5 of the Code – and, if necessary, securing a Court Order - in order to override the need for such an agreement.

The fundamental purpose of the Code is to facilitate the development and provision of electronic communications networks. Accordingly, apparatus installed with the benefit of Code powers enjoys a significant measure of protection from disturbance and from the enforcement of rights to require its removal.

This Code protection applies not only against those property owners and occupiers who are directly bound by an agreement or Court Order, but also against any person who might acquire or resume possession of the land.

Why do property owners dislike the Code?

The difficulties for those dealing with the Code include the following:

  • it offers stand-alone statutory protection for the electronic communications apparatus of Code operators - which is similar to (but arguably more powerful than) security of tenure under the Landlord and Tenant 1954.
  • it is badly drafted – described by Lewison J as “one of the least coherent and thought-through pieces of legislation on the statute book”; he went onto describe the drafting of the Code as “lamentable” and said that it is “extremely different to understand and that the overall scheme of the Code is difficult to fit into a coherent framework”, and
  • there is virtually no case-law to offer guidance on the interpretation or operation of the Code’s provisions.

Below is a summary of the specific difficulties which can be faced by property owners when approaching the removal of Code apparatus.

Paragraph 21 procedure for removing Code apparatus

Paragraph 21 of the Code restricts the ability of any person to enforce rights to require removal of electronic apparatus and it imposes a notice procedure for a property owner to follow in such circumstances.

This can be complicated where a Code operator allows other network operators to use its apparatus, eg a mast, for the purposes of their networks in addition to its own use, since paragraph 21(11) currently confers protection on any operator using equipment for the purposes of its network, regardless of ownership.

This creates uncertainty and increases costs for property owners as they may have to negotiate with and serve notices on multiple operators.

(This issue may be addressed if the Law Commission’s proposals for updating the Code are implemented since, although it has suggested an automatic right for operators to share equipment without extra charge, only the original operator would enjoy the benefit of protection under the Code.)

In order to prevent a property owner from removing apparatus following service of a paragraph 21 notice, an operator needs to serve counter-notice under paragraph 21(3) within 28 days. The counter-notice must do one or both of the following:

  • state that the person is not entitled to require the removal of the apparatus, and/or
  • specify the steps which the operator proposes to take for the purpose of securing a right against that person to keep the apparatus on that land.

Operators tend to frame their counter-notices in two parts: the first part asserts that the person serving the notice is not entitled to require removal of the apparatus and the second part says (without prejudice to the first) that if the notice were held to be valid then the operator would take steps to secure its rights over the site.

In practice, (assuming that a paragraph 2 agreement would be unlikely) this requires service of a paragraph 5 notice and (as an interim step) making an application under paragraph 6 of the Code for temporary rights pending the outcome of proceedings under paragraph 5.

Paragraph 21 cannot be excluded or varied by agreement. Consequently, provisions commonly found in agreements, leases or licences which purport to limit the right of an operator to serve a counter-notice under paragraph 21(3) will be ineffective for that purpose. (Although such provisions may be useful for other reasons – see below.)

If the operator will not agree to remove its apparatus voluntarily, then the property owner is required to pursue Court proceedings in order to seek to achieve this. This can delay any plans which the property owner may have for its property and increase costs.

When considering a property owner’s application under paragraph 21, the Court must consider whether the steps specified in the operator’s counter-notice would secure the rights necessary to keep the apparatus on the land.

In essence, this requires the Court to consider the outcome (and therefore to apply the tests) of a paragraph 5 application (see below). There is therefore no guarantee as to the outcome of the property owner’s claim for possession.

Test under paragraph 5 of the Code

The Court may make an Order for the installation of electronic communications apparatus under paragraph 5 if, but only if, it is satisfied that any prejudice caused by the Order:

  • is capable of being adequately compensated for by money, or
  • is outweighed by the benefit accruing from the Order to the persons whose access to an electronic communications network, or to electronic communications services, will be secured by the Order.

In determining the extent of the prejudice, and the weight of that benefit, the Court shall have regard to all the circumstances and to the principle that no person should unreasonably be denied access to an electronic communications network or to electronic communications services.

There is a lack of case law as to how this test is likely to be applied by the Courts, since operators tend to shy away from the risk of having their Code rights – and the level of consideration to be paid for those rights - determined by the Court.

In relation to the weighing of prejudice and benefit, the Code provides no guidance as to the circumstances in which it might be reasonable to deny a person access to an electronic communications network.

There is an argument that the Court is not being asked to consider whether the public would be unreasonably deprived of a particular network or service, but whether the public would be unreasonably deprived of networks or services per se.

However, the Law Commission’s proposals for updating the Code indicate that there should be consideration of the public interest in access to a choice of high quality electronic communications services.

Is paragraph 21 a real problem for property owners?

Issues relating to the removal of Code apparatus tend to arise where a property owner wishes to redevelop its property. In such cases, it seems likely that the Court would be under severe pressure to find that compensation in money would not be adequate where the effect of making an Order would be to thwart a major development or redevelopment.

Alternatively, it is possible that the Court may indicate that for such monetary compensation to be adequate it would have to approach the anticipated returns to the developer or property owner over the projected lifespan of the development, albeit discounted for accelerated receipt.

If the development were not thwarted, but merely made more expensive by the need to plan around apparatus, then the figures may be smaller, but still significant. Faced with such a potential cost, an operator may well conclude that the payment of compensation would render the site wholly uneconomic.

It is also worth mentioning that, although paragraph 21 cannot be excluded or varied (as stated above), the Court’s consideration of the balance of prejudice and benefit might be affected by any agreement or undertaking previously given by the operator not to serve counter-notice under paragraph 21(3).

Such a provision may help a property owner to persuade the Court that the loss to the operator of its particular site would not be fatal to the operator’s network, notwithstanding the clear terms of paragraphs 27(2) and 27(3) of the Code.

In my experience, property owners can help to ensure that apparatus is removed within their preferred timetable for redevelopment if they discuss the position with the operators well in advance – so that the operators have time to investigate and secure an alternative site.

Operators usually require around 2 years to achieve relocation and the Law Commission’s proposals for updating the Code include a recommendation that operators should be given 18 months’ notice.

Unclear interaction between the Code and the 1954 Act.

Very often, agreements with Code operators exclude the protection of the 1954 Act. When granting any new written agreement to a Code operator, property owners are safest to assume that it will be regarded as a tenancy and that it should therefore be excluded from the 1954 Act for the avoidance of doubt.

Where this is achieved, the property owner will at least have avoided one potential headache – as it is not presently possible to contract-out of Code protection.

Where the 1954 Act is not excluded from an agreement with an operator, it may be necessary to consider whether the document creates a lease or a licence. As ever, the substance of the agreement – rather than the form – is the key here, as per Street v Mountford [1985] AC 809 (HL).

If the agreement does not expressly grant exclusive possession over a defined area and instead gives more restricted rights (to install and operate apparatus) in relation to an area of land, then it is arguable that exclusive possession has not been granted and that there is a licence rather than a tenancy.

A comparable illustration may well be the decision in Clear Channel UK Limited v Manchester CC [2005] EWCA Civ 1304.

Where an agreement with a Code operator is not excluded from the 1954 Act and is likely to be regarded as a tenancy, there is potential for confusion and extended conflict. This is because of the lack of any cohesion between the procedures provided for under the Code and under the 1954 Act. As a result, property owners appear to have to follow the two apparently conflicting routes separately in order to terminate arrangements with a Code operator.

(The Law Commission’s proposals for updating the Code recognise that these separate routes are incompatible and has advised that the 1954 Act should not apply to electronic communications apparatus agreements. A number of the provisions recommended for the revised Code (in particular for terminating Code rights) are modelled on Part II of the 1954 Act, but there would be no similar right to exclude its protection.)

Where a tenancy with a Code operator is not excluded from the 1954 Act and the landlord wishes to regain possession, section 30(1) of the 1954 Act will need to be satisfied by the landlord before it can even start to operate the Code’s termination procedure under paragraph 21.

Otherwise, the Code operator may well be able to show that the property owner is not entitled to serve notice under paragraph 21 – on the basis that the owner is not “for the time being entitled to require the removal” of the apparatus.

However, with grounds (f) and (g) of the 1954 Act, a Code operator may be able to challenge the landlord’s opposition to a new tenancy on the basis that the landlord is unable to satisfy the relevant evidential hurdles because of the operator’s Code protection.

For example, how can a landlord show that it is able to undertake a redevelopment within a reasonable time after the termination of the tenancy if it will be required to pursue the lengthy and uncertain Code procedures before it can remove the operator?

This issue has the potential to cause real difficulties for landlords looking to redevelop their properties unless they have insisted on the exclusion of the 1954 Act from their agreements with operators.

It seems likely that the pragmatic route would be for the Court dealing with a 1954 Act claim to allow a reasonable time for the landlord to take steps under the Code, although it remains questionable whether the Code procedure can be resolved within such a timetable!

The safest course is obviously to ensure that all agreements with Code operators are excluded from the protection of the 1954 Act.

Again, landlords can help to ensure that apparatus is removed within their preferred timetable for redevelopment if they discuss the position with the operators well in advance – so that the operators have time to investigate and secure an alternative site.

What about “lift and shift” under paragraph 20?

It is also worth mentioning that paragraph 20 allows a person with an interest in land to require the “alteration” of electronic communications apparatus where this is necessary to enable a proposed improvement of the land, ie the Code contains provisions for “lift and shift”.

This right arises even where there is no express reservation of it under the agreement with the operator and/or where the agreement has not yet come to an end.

“Alteration” is defined at paragraph 1(2) as including “the moving, removal or replacement” of the apparatus (emphasis added), although the right can only be exercised where the person seeking removal plans an “improvement” to the subject land. “Improvement” is defined in paragraph 20(9) as including a “development and change of use”.

To use paragraph 20, a notice procedure must be followed by the property owner and the operator is entitled to serve a counter-notice. If it does so, then the property owner will need to seek a Court Order in order to require the alteration and will need to prove that it intends to carry out a development which requires the alteration sought.

Under paragraph 20(4), the Court will only grant an Order under paragraph 20 if, having regard to all of the circumstances and the principle that no person should unreasonably be denied access to an electronic communications network or to electronic communications services, it is satisfied that:

  • the alteration is necessary, and
  • the alteration will not substantially interfere with the service provision by the operator – see paragraph 20(4).

The Court must also be satisfied that the operator is able to make the alteration – see paragraph 20(5).

Caution must be exercised before a property owner seeks to rely upon paragraph 20, as it can find itself having to pay for the operator’s expenses incurred on works to execute the alteration sought – see paragraph 20(8).

It is worth noting that the Law Commission’s proposals suggest that a revised Code should not include the additional rights given to landowners under paragraph 20.

In its view, there is no need for such additional protection for landowners because provisions for “lift and shift” can be negotiated (or imposed) within the agreement granted to the operator.

Any future agreements granted to operators should therefore now include such provisions.

Other issues under the Code for property owners

Installation of apparatus without property owners’ knowledge and/or consent

The principal method of conferring Code powers in relation to apparatus installed onto land is via an agreement “in writing” from “the occupier” for the time being of that land.

According to the definition of “writing” in Schedule 1 to the Interpretation Act 1978, this includes “typing, printing, lithography, photograph and other modes of representing or reproducing words in a visible form.”

There is no requirement for the agreement to be given by deed or any other particular form. Property occupiers need to be alert to this, since it is arguable that even completing an operator’s application form could be construed as sufficient agreement in writing.

Any communications relating to a proposed installation should therefore be expressed to be “subject to contract”.

The “occupier” is not required to have any interest in the land and may therefore be a licensee, a tenant at will or a squatter. A written agreement given by any of these would be sufficient to confer Code powers in respect of apparatus on the land.

Paragraph 2(2) provides that the freeholder will not be bound by any such agreement unless:

a) he conferred the right himself as occupier of the land, or

b) he has agreed in writing to be bound by the right, or

c) he is for the time being treated by virtue of sub-paragraph 2(3) as having so agreed, or

d) he is bound by the right by virtue of sub-paragraph 2(4).

Sub-paragraph 2(3) applies where a tenant with a term of a year or more gives the paragraph 2 agreement. In those circumstances, every person with an interest in the land is treated as bound by the agreement while the Lease remains in force.

Sub-paragraph 2(4) provides that where a person owning an interest in land gives a paragraph 2 agreement then that agreement binds any inferior interest in and any occupier of the land deriving rights from the person who gave the agreement.

The key practical impact of these provisions is that a person who has agreed to be bound, or is treated as being bound, by a paragraph 2 agreement cannot claim to be entitled to require the removal of apparatus and so cannot serve notice under paragraph 21 (see below).

Even more importantly, where a paragraph 2 agreement expires, or where a person is no longer treated as bound by such agreement, a right to require removal of apparatus from the land cannot be enforced without following the procedure set out in paragraph 21.

Is this part of Code protection a real problem for property owners?

Property owners tend to be extremely concerned by the potential operation of these provisions for the protection of electronic communications apparatus. For this reason, many landlords include within Leases a specific prohibition on tenants entering into any paragraph 2 agreements.

Although common practice, it is generally considered that a covenant on the part of a tenant not to enter into a paragraph 2 agreement would not invalidate any agreement granted to an operator in breach of that covenant.

Nonetheless, the covenant should establish a contractual claim against the tenant to allow the landlord to recover costs that may be incurred in following the paragraph 21 procedure (see above) to remove the apparatus and for any diminution in the value of the reversion resulting from the presence of Code protected apparatus.

Such a claim may give little practical comfort to landlords. However, case law has potentially given landlords a stronger weapon to use where Code powers are conferred in breach of covenant.

Following the decisions in Hemingway v Dunraven [1995] 1 EGLR 61 and Crestfort v Tesco [2005] EWHC 805 (Ch), it may be possible for the landlord to seek to undo the arrangement between its tenant and the operator.

The remedy awarded in both Hemingway and in Crestfort was a mandatory injunction requiring the surrender of underleases granted in breach of covenant. Against the tenant, the cause of action was breach of covenant. Against the subtenant, the action was based upon the tort of inducing a breach of contract.

Consequently, it seems that an operator taking an unauthorised paragraph 2 agreement from a tenant or other occupier is at risk of being subject to a similar order on the basis of inducing a breach of contract.

Moreover, as Lightman J emphasised in Crestfort, the landlord’s remedy may be damages as well as (and not just instead of) an injunction. (The protections afforded by paragraphs 27(2) and (3) might not avail the operator in those circumstances.) 

Forfeiture is another option for property owners to consider when dealing with tenants who have granted paragraph 2 agreements in breach of their Lease terms.

However, this route for securing the removal of the apparatus is by no means straightforward since it would merely accelerate the point at which a paragraph 21 notice might be served on the operator.

Despite recognition that landlords can sometimes become bound by Code rights granted to operators by tenants without authorisation, the Law Commission’s recommendations for updating the Code failed to include any proposals to address this issue.

Compensation and consideration being determined by the Court

The Code currently provides for compensation (in respect of disturbance and inconvenience) plus consideration to property owners where their land is crossed.

However, there is little certainty as to the appropriate measure of consideration and the following comment by the Court of Appeal in Bridgewater Canal Company Limited v Geo Networks Limited [2010] EWHC 548 (Ch) is unlikely to have assisted the position:

“I do not approach the question, as Counsel for BCC was inclined to do, on the basis that the Code should be interpreted so as not to burden a person’s property without some compensatory payment.”

In the event that consideration cannot be agreed between the parties and a paragraph 5 notice is served by the operator, the level of consideration will fall to be determined by the Court under paragraph 7 – usually the County Court (at least at first instance).

Those who have dealt with unopposed Lease renewals before the County Court will know that this is not always the most appropriate forum for determining valuation issues.

Moreover, judges considering the application of the Code face a lack of positive guidance on the question of the appropriate level of consideration payable by operators; the Court has merely confirmed that consideration is not based on a share of profits or a ransom payment.

(See Mercury Communications Ltd v London and India Dock Investments Ltd [1994] 1 EGLR 229 and Cabletel Surrey and Hampshire Ltd v Brookwood Cemetery Ltd [2002] EWCA Civ 720.)

The use of the Court process is also fraught with delay and significant costs, the level of which often cannot be justified when compared with the consideration likely to be payable under an agreement relating to electronic communications apparatus.

As a result, parties to such proceedings may well find themselves being restricted on costs recovery under the cost budgeting rules introduced into the CPR by the Jackson Reforms.

The Law Commission has accepted the concerns raised about Code disputes being resolved in the County Court. It suggests that the appropriate forum for resolving disputes would be the Lands Chamber of the Upper Tribunal, since this is more used to dealing with valuation issues.

When will the Code be updated?

The Law Commission published a Consultation Paper in June 2012 regarding possible changes to the Electronic Communications Code.

The Law Commission’s Report of recommendations for a new Code was published on 28 February 2013, in which it confirmed the continuing need for legislation which compels property owners to allow the installation of electronic communications apparatus.

As mentioned above, there is real potential for any new legislation to impact further on the rights of property owners – although the Law Commission has recommended that any revised Code should not affect agreements already in place, ie it should not have retrospective effect.

At present, DCMS is considering the Law Commission’s proposals and there is no firm news on a timetable for legislation.

This article was written by Emma Humphreys.

For more information please contact Emma on +44 (0)20 7203 5326 or emma.humphreys@crsblaw.com