25 February 2015

Cracking the code: Key points for landowners


Bertie Hoskyns-Abrahall
Partner | UK

Agreeing to the installation of telecoms apparatus on otherwise vacant land may often be financially attractive but it is a legally complex, and potentially perilous, enterprise for landowners. Few realise the full extent of the statutory protection afforded to operators under the Electronic Communications Code. Following the introduction, and then withdrawal, of what appeared to be a simpler and more user-friendly code we examine how landowners can, for the time being, navigate ‘one of the least coherent’ pieces of legislation to reach an agreement that meets the operator’s and their own objectives.

Know your operator

The code grants statutory rights (‘code rights’) to ‘operators’ of electronic communications apparatus. An operator includes any communications operator who has obtained a direction from Ofcom that the code applies to them. It goes without saying that all landowners should consult this list before entering negotiations. As new independent operators enter the market and established bodies upgrade their equipment, landowners may find that code rights are not applicable to their specific circumstances and, consequently, that their bargaining position is better than originally envisaged.

Make sure you are a party

The current code enables occupiers to grant code rights but sets out extremely complex and unclear provisions about the effect on the landowner. For example, if a tenant with a 10 year lease grants a 5 year lease of a plot to an operator, the code rights created would not bind the landowner. However, that same landowner, like the tenant, would be restricted from repossessing the site and forcing the equipment’s removal at the end of the term.

The landowner cannot protect itself simply by imposing a covenant on tenants in a lease not to enter telecommunications agreements. Rather, the landowner’s best option is to contract directly with the operator. As a contracting party, the landowner can decide when to serve notice to alter and remove the apparatus, and, should that fail, claim compensation for the operator’s continued occupation.

Protect your position

Operators benefit from a form of security of tenure under the code. This makes it extremely difficult for the landowner to ‘lift and shift’ equipment during the term, or remove it entirely at the end. Under paragraph 21 of the code, the landowner can notify the operator that it wishes to remove the apparatus in order to develop or otherwise use the land. However, if the operator issues a separate notice under paragraph 5 to continue occupation and, as is likely, can show that the benefit of its apparatus outweighs the prejudice to the landowner’s rights, the landowner is powerless to remove it.

Whilst landowners cannot contract out of the security of tenure provisions of the code, they should consider imposing ‘workaround’ terms at the outset to minimise the financial repercussions of the operator’s unexpected, continued occupation. These could include:

  • providing for punitive payments for periods of occupation after the expiration of the agreement; or
  • requiring a full indemnity for losses that arise as a result of continued occupation (including losses arising from any inability to re-develop the property)

Contracting out before contracting

Code rights may be granted to an operator by way of a lease. Unless the parties have contracted out, such a lease will arguably fall within the protection of the statutory provisions contained in part two of the Landlord and Tenant Act 1954 (‘LTA 1954’), on the basis that the operator is occupying the property for the purpose of carrying on a business. The effect is such that a landowner cannot successfully remove apparatus under paragraph 21 of the code. Landowners should therefore insist on contracting out of the LTA 1954 provisions before entering into a lease with an operator.

You should be careful what you sign. If you are not sure what you are being asked to sign or what its legal effect may be, professional advice should be sought from a legal adviser.
 

Bertie Hoskyns-Abrahall Partner | London

Category: Article