Landowners have historically put unproductive parts of their land to use by allowing telecoms operators to site apparatus on them and charging the operators market rents. Increasingly, digital communication is perceived as a basic need, similar to gas, electricity and water, therefore demand for suitable sites to provide the infrastructure will only increase, particularly with the projected introduction of 5G technology.
In anticipation of this, the new Electronic Communications Code (the Code), introduced in 2018, changed the basis on which the valuation of such potential sites is calculated. It was felt by government that the value of agreements between landowners and telecoms operators should closer reflect the price that utilities companies pay landowners for wayleaves. While a landowner and operator would usually agree the terms of a deal, the Code provides a mechanism for an imposed settlement which produces a result much less generous to the landowner. Essentially, the value of the site to the telecoms operator must be ignored and instead only the bare value of the site to the landowner is assessed.
The recent case of EE Limited and Hutchison 3G UK Limited v. The Mayor and Burgess of the London Borough of Islington concerned the use of roof space on a 10-storey block of council flats and offers the first example of the difference in valuing land use under the Code. Beyond its primary architectural purpose, the roof space was deemed to have negligible value to the landowner. The telecoms operator had offered the London Borough of Islington an annual rent of just over £2,000 for a 10-year lease, which the local authority had rejected.
During the course of the trial, after hearing expert evidence which differed greatly, offering rental values ranging from £1 to £13,250 per annum, the tribunal concluded that the roof space had nominal value only and found that an annual rent of £50 was appropriate. However, as well as any rent-like payment, the Code requires the tribunal to make an assessment of any loss or damage a landowner might suffer from the equipment being sited on its roof. For this, the tribunal must take into account the actual situation.
In this case the tribunal concluded that the actual loss to the landlord was also nominal, but felt that it was appropriate that the operator should contribute towards the cost of maintaining the building. The tribunal assessed this cost by reference to the actual service charge paid by the residential leaseholders in the building. On average, this was about £1,300, which the tribunal discounted for the services that the operator would not actually use, arriving at a sum of £1,000 per annum. A further compensation claim by the landlord, to try to take the sum back to pre-Code calculations was refused.
Economically, this is a very significant decision for both telecoms operators and landowners, as it sets the new criteria on the basis of which parties will be able to negotiate. Operators and landowners will of course seek to avoid litigation and come to an agreement wherever possible, but the line has now been drawn in the sand, so all parties should be aware of just how much the machinery of the Code could affect their deals.