This article was first published by EG magazine on 10 January 2023.
Kerry Bretherton KC, Catherine Rolfe and Isabel Emerson-Lich reflect on the five years since the Code came into force and look at what is in store in 2023.
It is hard to believe that it has been five years since the new Electronic Communications Code came into force. Even casual followers of Code-related matters will know that there has been a plethora of cases aimed at clarifying the Code and plugging gaps in its drafting, not least a Supreme Court decision (Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd and conjoined appeals [2022] UKSC 18; [2022] EGLR 28).
Looking back
Compensation and consideration: where has the case law ended up?
The Code distinguishes between two forms of monetary redress available to landowners for permitting the exercise of code rights on their land:
- Compensation for loss or damage caused by code rights, and;
- Consideration payable pursuant to a code agreement calculated using the “no network” valuation method, which ignores the use of the site for a communications network.
Post the new Code, consideration dropped from tens of thousands of pounds to only a few thousand a year in many cases.
The Upper Tribunal (Lands Chamber) has been very critical of the comparative approach many parties sought to adopt in the early valuation cases, as the hypothetical market in which a code agreement is assumed to be granted for non-telecoms use simply does not exist.
It has instead adopted a three-stage approach, whereby the parties identify the alternative use value of the land and then the value of the additional benefits to the operator and burdens on the landowner arising from the code agreement.
In an effort to minimise disputes, in EE Ltd & another v Affinity Water Ltd [2022] UKUT 8 (LC); [2022] EGLR 10 the UT created a guideline table for the levels of annual consideration it would expect to see, ranging from £600 for a rural estate location to £5,000 for a city residential rooftop. The UT has even indicated that unless parties have compelling reasons to depart from the Affinity Water table, it may refuse permission to adduce valuation evidence at all.
Compensation on the other hand can be awarded as a lump sum or by way of continuous payments, depending on the loss incurred. Aside from refusing various claims for compensation, such as a general right for the landowner to recover the costs of supervising access to its land, the UT has not been called on to consider compensation in any detail but could, for example, include damage to the landowner’s reversion.
The Code and the Landlord and Tenant Act 1954 – issues for developers, strategy for tenants
An explicit aim of the new Code was to decouple the security of tenure available to operators under the Code from the established rights under the 1954 Act. Although operators now cannot take advantage of both regimes, a separate issue arises for landowners that wish to redevelop a property with both operators and other business tenants in situ.
The timescales under the Code and the 1954 Act are radically different and may therefore come into conflict. While the 1954 Act requires a six-to-12-month termination notice, with opposed lease renewal proceedings often taking 12-18 months to get to trial, the Code stipulates 18 months’ notice but with the potential for an UT hearing in less than a year from service, and some months ahead of contractual termination.
Under both regimes, the landowner must prove a settled intention to redevelop and a reasonable prospect of carrying out the development at the date of the hearing. The slower process under the 1954 Act may prevent a landowner from proving that it can obtain vacant possession of the rest of the site in time – and failing to oppose an operator’s application may in turn upset subsequent opposed renewals under the 1954 Act.
But there are changes afoot in 2023 for renewals under the 1954 Act that involve operators – more on this below.
The Upper Tribunal: issues and tips on UT procedure
When the new Code came into force, it was unclear what approach the UT would take to managing its considerable new case load. Now that some time has passed, certain key themes have crystallised, including:
- Compliance with the UT’s directions is essential. The UT has on various occasions chosen to disregard evidence submitted outside of the designated timetable.
- The UT is very strict on cost recovery – parties must be mindful of proportionality when pursuing a reference. Examples of matters that can lead to adverse cost orders are withholding information or maintaining arguments for tactical purposes, as well as submitting unnecessary comparative evidence on valuation.
- The UT does not like Tomlin orders (orders that stay a claim on terms agreed between the parties). Even where the parties settle the reference by consent, the UT will expect the parties to submit an order which disposes of the reference. Any subsequent issues with enforcement will require fresh proceedings.
Going forward
Telecommunications Infrastructure (Leasehold Property) Act 2021
It is not just happy birthday – it is also going to be a very happy new year for the Code. Part 4A of the Code, which is added by the 2021 Act and the Product Security and Telecommunications Infrastructure Act 2022, came into force on 26 December 2022. The First-tier Tribunal, which determines applications under Part 4A, is preparing for a flood of applications in 2023.
Part 4A allows operators to obtain code rights which enable them to provide telecoms services to leased premises over land connected to the leased premises where the grantor is unresponsive. Premises must be a “multiple dwelling building” (a building which contains two or more sets of premises used or intended to be used as separate dwellings).
A lessee of qualifying premises may request that a code operator provides their leased premises with telecoms services. The operator then sends the “required grantor” (the freeholder) a request in writing to confer a code right on it. The operator must serve two warning notices and a final notice before making an application to the FTT.
A warning notice must be in writing, identify which notice it is, include a copy of the request notice and explain that unless the grantor responds to the operator, the operator may apply for a Part 4ZA order or intends to make such an application. The notice must also set out the effect of the Part 4ZA order and contain any other specified information. Any notice which does not meet these criteria will be invalid.
The first notice may be given 14 days after the request was made; the second notice 14 days after the first; and the final notice within the permitted period (starting on the later of the date 14 days after the second notice or 28 days after the request was made and ending 28 days after the second notice was given).
Only if no Part 4ZA application has previously been made, all the conditions have been complied with and no response has been received from the grantor (a response is a written agreement or refusal to be bound by the code right or written acknowledgment of one of the notices) can an operator make their 2021 Act application under paragraph 27ZE. The application must be accompanied by evidence and be on notice to the required grantor.
The FTT may only make a Part 4ZA order if the requirements are met and there is no objection by the grantor. An order will impose a code agreement on the grantor with mandatory terms including the details of the works, necessary consent, restoration after the works, insurance, maintenance and upgrading.
Once granted, Part 4A code rights can be exercised to provide telecoms services to the original lessee’s premises and other premises in the same building, provided “the provision of the service to the other premises imposes no additional burden on the required grantor” (has no additional adverse effect on the grantor’s enjoyment, or causes additional loss, damage or expense).
By paragraph 27G, expiry of Part 4A rights takes place by effluxion of time, if there is a replacement agreement or if an application is refused. Paragraph 27H enables compensation to be payable in respect of a Part 4A order with the amount either agreed or determined and broad scope to order the operator to make payment.
The Product Security and Telecommunications Infrastructure Act 2022
The 2022 Act, which received royal assent on 6 December, will introduce the most far-reaching changes to the Code since it came into force in 2017. These are aimed at making the process for the installation and maintenance of equipment on private land more efficient and include an alternative dispute resolution procedure and automatic upgrade and sharing rights for equipment installed pre-2017.
It also seeks to align the procedure for renewals of pre-2017 code leases to operators under the 1954 Act more closely with those under the Code.
The FTT will have jurisdiction to hear these renewals – the valuation process will mirror that of the Code and code-based compensation will be available in relation to these agreements. Only time will tell what effect these changes will have in practice.
The future
While 2021 Act applications are likely to occupy a lot of the FTT’s time, what about the existing Code? The comprehensive body of case law on consideration has settled the law in relation to such matters in most cases. Further, the findings of the Supreme Court in relation to “occupiers” rendered irrelevant proposed legislative changes to the Code allowing operators in situ to seek new rights.
However, aside from the 2022 Act, a number of issues under the existing Code remain to be fully considered. These include the impact on developers of delays in works caused by code operators, which can have significant impact on construction contracts as well as cases on apparatus removal.
It will be very interesting to see what 2023 and beyond has in store for the Code.