Hi, welcome to today's Webinar on, an introduction to the new Telecoms code, Understanding your telecoms agreements. I'm Justine Ball a legal director here at Shakespeare Martineau, in our Real Estate Team.
So, for our first Schmoll on demand webinar for telecoms, I thought it best to start with a short introduction to the code for landowners. And looking at the basic principles of the new telecom code.
We will then move on to understanding what type of telecom's agreements you have.
With this knowledge, you can consider whether you should take any steps to renew your agreements, to secure a better rent for a preferred period, or seek modernized terms take into account any redevelopment plans you may have in the future.
So, this webinar will look at the renewal of telecom's agreements, rather than termination, the different procedures that may apply, depending on the type of agreement you have, and how this might benefit you as a result.
So, a new Telecom's code was introduced on the 28th of December 2017 by virtue of the Digital Economy Act 2017. We will call this new code going forward.
This replaced the previous, electronic communications code, which was initially introduced by the Telecommunications Act, 1984, and then revised by the Communications Act, 2003.
So we will call this, the old code going forward.
The primary purpose of the old code was to regulate the relationship between telecoms operators and landowners because there was no law that did that before then.
There were greater numbers of telecoms operators coming into the market. And the intention for the old code was to encourage operators through competition to further develop the network for wider use by the public.
However, in recent times there has been a monumental shift in the way we all access Internet and mobile communication. A mobile network is needed at home work, and when you are on the go all times of the day.
So in order to accommodate the needs of the public, the new code was introduced.
The new code makes it easier for operators to access land, for the purposes of installing new equipment, and maintaining and upgrading existing equipment to meet the increasing needs of our communities.
Further, in order to preserve the growing network, the new code, as well as the old code, grunted statutory rights of security of tenure to telecoms operators.
This means that their apparatus cannot be removed without first adhering to the process into the new code, which would be in addition to any process of termination under the agreement itself.
The new code has strengthened this security for operators, and it is now more difficult for landowners to terminate agreements and get at possession of land buildings. In addition, the way in which Londoners are to be compensated for such equipment being on their land changed under the new code.
Under the old code, it was left to the parties to negotiate a rent, and such valuations were based on what a landlord and tenant would agree in the open market.
However, the new code deliberately departed from this principle in order that rents would be significantly reduced so that the cost of the consumer utilizing the telecoms network would remain low.
However, there may be ways in which you can circumvent the full impact of the downsides of the new code, depending on what type of agreement you have.
So, as I said before, you may be able to avoid the less favorable rental valuations and onerous terms of the new code. If your telecoms agreement is not caught by the new code.
To do this, we need to understand what type of agreement you have. Is it a new code agreement caught by the provisions of the new code, or is it something else? Perhaps? A business lease pursuant to the Landlord and Tenant Act, 954.
I will call this, the 54 act going forward, for sure.
So, what type of agreement do you have? The first few things you need to check our Number one. Is it in writing and signed by both parties.
Number two, is it for a defined term?
Number three: Does the telecoms operator occupy for the purposes of its business?
And number four, is the primary purpose of the agreement to grant code rights to the telecom operator.
We will assume that the answer to all of these questions is yes. For the purposes of this webinar, I will not consider the position where there is no agreement, and this was need a separate webinar altogether.
So once you've checked all of those things, the next thing you need to check is whether the agreement is dated before the 28th of December, 2017, or is it dated on or after 28 December, 2017?
If the agreement is dated on or after the 28th December 2017, the agreement will be a new code agreement, and any renewal of that agreement will be pursuant to the terms of the new code.
As such, the new code rental valuations will apply, which is the no network assumption, which I will come back to later. And the operators will be entitled to a new lease on other preferable terms, such as the ability to upgrade and share apparatus with others.
If the agreement is dated before the 28th of December 2017, then you need to look at your agreement to see if it is expressly excluded from the 54 Act.
You will know whether or not it is excluded from the 54 Act because there will be express wording to that effect in the Agreement.
There should also be a separate notice and or statutory declaration confirming that the Agreement is contracted out of 54 Act.
If there is wording which excludes the 54 Act, then the lease will be a new code agreement and it will be renewed pursuant to the provisions of the code, as I previously mentioned. If there is no wording in the lease confirming that the lease is excluded from the provisions of the 54 it, then the agreement will be a business lease with the benefit of the security of tenure pursuant to the 54 Act.
As the agreement is a 54 lease, it cannot also be a lease which benefits from the provisions of the new code.
So when it comes to renewing or terminating that agreement, the 54 act will apply and not the new code.
This is really important.
So what does it mean for landowners? If you have an agreement which is not expressly excluded from the 54 Act, the 54 Act will apply.
So this is good news for landowners because the telecoms agreement can be renewed pursuant to the terms of the 54 Act, which is a well established, unknown body of law.
It also presents positive opportunities to take advantages of, including, number one, obtaining a potentially higher value for rent.
The renewal would look at valuing the rent pursuant to section 34 of the 54 Act, which is based on an open market rent, and the value of the site to the telecom operator.
This usually produces a higher rent valuation than under the new code.
The method of valuation which is adopted pursuant to the new code is a no network assumption, as I mentioned earlier.
This type of evaluation looks at the value of the site to the land owner which effectively strips out any value as a telecom site to an operator and that drives down the rent.
There's a very recent case that was decided on the 21st of August 2020, this is vodaphone Limited and Hand over Capital.
This case upheld that rent valuations pursuant to the 54 wracked must take into account the open market.
As such, comparable is based on the no network assumption, which is done under the new code, were rejected in favor for looking at higher valued comparables, which is good news for landowners.
This is an important case as it is the first case, which has considered the correct basis upon which to value rent for 54 racked telecom's Lease Renewals.
And secondly, the other terms, such as length of term, may also be more favorable for landowners. The call will look at Section 33 and 35 of the 54 Act, and not the terms of the new code to assist with its decision in determining the length of term.
The Court in the Hannover case, I just mentioned, sought to balance the needs of the tenant with that of the landowner and rejected the operators request for a short-term flexible lease.
The Court instead opted for a longer term lease with a conditional break, right? So that the landowner was provided with certainty of occupation for at least five years, which is great games. So, what should landowners do now, and how can we help? firstly, review your agreements? Take a look at your portfolio and see whether you may be able to renew the same on better terms, either by negotiation or initiating the renewal process. You do not need to feel pressured by telecoms operators, approaches. You may have better leverage than you think.
Secondly, get advice. We can help you by looking at your agreement, your specific circumstances, and provide you with options. Each matter is considered on its own merits, and on a case by case basis. So it is important to talk through your individual sites and to see what benefits you may be able to secure.
Thirdly, have your existing negotiations stalled?
If so, we may be able to assist you. to get back on track, Contact us, and we can advise you on how to formulate the best strategy, to put you in the best position. We hope this has been useful for you as an introduction to the new code as well as a reminder that it is not all doom and gloom for landowners. When it comes to telecoms arrangements, you may be able to negotiate a better deal if you know your rights. So please do send to us your agreement for review, and we can look at how we can help you.
Finally, please do visit our Small under Man pages to access recordings of all webinars and sha talks. Also, please feel free to join in our conversations on LinkedIn and Twitter. Thanks very much to join in our conversation. Thanks very much.