Q&A: Code rights queries answered

Samuel Lear and Jonathan Wills field Telecoms Code questions in the light of a recent Supreme Court decision

Question

Does a telecoms operator, who has electronic communications apparatus on my land, have the right to seek new rights and/or to modify existing rights which are documented in a subsisting agreement made under an earlier version of the Electronic Communications Code?

Answer

Following a recent Supreme Court decision, it is likely that the operator will be able to seek genuinely additional code rights, but they will be held to their bargains as regards the existing terms of any extant code rights. Therefore, they will be prevented from seeking to modify the terms of their agreement during the course of its contractual term. Once the contractual term ends, the operator can instigate a procedure allowing it to modify existing code rights.

Explanation

The Supreme Court in Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd and conjoined appeals [2022] UKSC 18; [2022] EGLR 28 has provided helpful clarity on whether an operator is to be regarded as an “occupier” of the land (on which their apparatus is installed) when seeking new code rights.
Before this decision, it was understood that a landowner could not be regarded as an “occupier” of the land on which an operator had installed its apparatus, which meant that operators could not seek new code rights. Under paragraph 9 of the Code, a code right in respect of land may only be conferred on an operator by an agreement between the occupier of the land and the operator. Therefore, if an operator can be said to be occupying the land, a new code right cannot be conferred (as no party can contract with itself). In practice, this led to some operators attempting some impractical workarounds – for instance, applying for rights in respect of immediately neighbouring land which was not being occupied by them.

The Supreme Court, having decided that there is no fixed definition of “occupier” across the various legislation, took a purposive approach and looked at the context behind the introduction of the Code, which was to facilitate the rollout of electronic communications networks for the benefit of the public while balancing those objectives with the rights of landowners.

By deciding that operators are not to be considered as occupiers of the land, this has unlocked an operator’s ability to seek new code rights under the mechanism under paragraph 20 of the Code.

However, it was also determined that the ability for operators to modify existing rights under a subsisting code agreement (absent agreement between the site provider and the operator) would only arise at the end of the contractual term. This is because it is generally regarded that contracting parties should keep to their promises. Part 5 of the Code provides the mechanism by which code agreements can be terminated or modified once the contractual term of a subsisting agreement has come to an end.
Therefore, unless you are willing to agree otherwise, the operator would be able to seek the conferral of additional code rights by the Upper Tribunal (Lands Chamber). However, it would only be in a position to modify an existing right under your agreement once the contractual term has come to an end, at which time the tribunal has a broad discretion under paragraph 34 of the Code

Question

I am a site provider and have a lease (protected under the Landlord and Tenant Act 1954) with an operator where the contractual term is about to come to an end. Is the operator able to rely on the procedure under Part 5 of the Electronic Communications Code to renew its existing rights?

Answer

Any lease that falls under the protection of the 1954 Act would need to be renewed first in accordance with the Act’s renewal procedure. The new lease would then be a code agreement which is governed by the new Code. When that new lease comes to an end, the operator would then be able to rely on the procedure under Part 5 of the Code to modify any existing rights under that new lease.

Explanation

Part 2 of the Act provides security of tenure to tenants occupying for the purposes of a business which means that, once the contractual term comes to an end, the lease continues until it is either terminated or renewed pursuant to the procedures under the Act.

In Cornerstone, the Supreme Court was tasked with determining whether a tenancy conferring code rights to operators under the previous code was protected by the Act. It was held in the Upper Tribunal and the Court of Appeal that the transitional provisions of the Code mean that an operator is not able to seek a renewal of their rights under Part 5 of the Code and would instead need to renew first by using the Act’s provisions. The Supreme Court agreed with the lower courts’ interpretation.
The practical implications concern matters of valuation, as the valuation provisions under the Act tend to be more favourable to site providers than those under the Code. The Product Security and Telecommunications Infrastructure Bill, if made into law, will modify the assessment of rent under the 1954 Act (and in particular under section 34) so that telecoms renewals would adopt the “no network” assumption that is applied under the Code. Therefore, one strategy is to instigate a renewal under the Act now to benefit from the potentially more favourable valuation provisions under the Act. Having said that, in EE Ltd and another v Morriss and others [2022] EW Misc 1 (CC); [2022] EGLR 8, Martin Rodger QC, sitting as a county court judge, held that, in a 1954 Act telecoms lease renewal valuation, it is valid to have regard to comparable transactions agreed in the shadow of the Code. This is because the parties know that the hypothetical bidder has the potential of recourse to the Code, and also because even in a “market” valuation, the rents being agreed in the market are heavily influenced by code valuations.

Therefore, it may instead pay not to renew the lease now, but rather continue to collect the higher old code market rent until the operator seeks to renew the lease. In this specialist area it is always important to obtain up-to-date valuation advice.

This article was first posted on the Estates Gazette.

Samuel Lear is an associate in the real estate disputes team at Charles Russell Speechlys LLP and Jonathan Wills is a barrister at Landmark Chambers