The First-tier and Upper Tribunals have been busy over the last couple of months with a flurry of cases considering terms for code agreements. Some have related to rooftop sites (with the decisions on those terms having general application) and some specific to greenfield/rural (particularly on rental valuation). Below is a summary of some of the telecoms rents and terms points we think it is important to note from these decisions.
Cornerstone Telecommunications Infrastructure Limited v The Chartered Institute of Personnel and Development [LC-2024-00098]
This case concerned a new rooftop site in Wimbledon. The operator and site provider were in disagreement over a number of terms of the new Code agreement. We have highlighted a few of the terms in dispute together with what the Tribunal determined, but it is worth the reminder that if there is disagreement on terms it is for the Tribunal to impose those terms and ultimately whether it will do so is a balancing act between the competing positions of the operator and site provider.
- The terms of the site provider’s re-development break.
It is generally accepted by operators that preventing redevelopment is not a purpose of the Code. Generally, though if a site provider has not clearly evidenced development proposals or plans, it becomes more difficult to secure (i) a redevelopment break at all or (ii) one with significant flexibility to the site provider. The site provider’s overall strategy for the property can impact on the proposed length of term of the agreement and the insertion of a break (with additional issues associated such as when the break can be exercised and the terms of the break clause).
Ultimately what the Tribunal is seeking to balance is allowing an operator a degree of certainty of occupation (given the investment of building their mast site) and allowing some flexibility to the site provider for changing plans.
So every set of circumstances will be different, but here the Tribunal was prepared to grant a 10 year term with a break exercisable on 18 months’ notice expiring from the fifth anniversary of the term. As we will see below, this seems to have become the staring position on site provider breaks.
- The lift and shift provisions.
Lift and shift clauses are fairly commonplace, but the detail can be in issue. Here the site provider had particular concerns about work that would be required to ageing M&E installations and replacement of roof coverings.
The Tribunal determined that if substantial relocation works were needed, that the site provider should provide the operator with reasonable notice, with 6 months considered reasonable in the circumstances. The Tribunal was not convinced that the ability to require relocations during the terms should be restricted, but did say the requirements for the operator to meet the costs of such relocations (when instigated by a site provider) should be limited to twice during the term. The ability to relocate cables/lines, on the basis this is a straightforward process, would be unlimited provided that equipment is simply being repositioned.
- Powering down
It is generally accepted that a site provider might need to undertake works that require power downs and these can affect all tenants of a building, including an operator. Operationally these sorts of clauses are a necessity as the site provider will usually want to have the ability to exercise such a right on notice and shorter notice in cases of emergency to facilitate works.
Here the Tribunal allowed a clause that provided the operator with 10 days’ notice if a power down was needed (or other reasonable period when urgent) and a restriction on non-emergency power down requests to 6 per year. Interestingly, the clause ordered give the operator scope to push back on whether it agreed the power down was needed (acting reasonably). In reality, operators are usually helpful when it comes to power downs.
EE Limited (1) Hutchison 3G UK Limited (2) v AP Wireless II (UK) Limited [LC-2020-55] (known as “Vache Farm”)
This decision concerned the renewal terms of a greenfield telecoms site, and the Upper Tribunal was asked to consider and determine the appropriate rent or consideration for such a site.
The parties had agreed some of the terms including that the new agreement would be for a 10 year term with a break exercisable by the operator after five years. There would be a rent review by reference to RPI after five years. A point of disagreement was the site providers’ right to termination if it intended to redevelop the site or neighbouring land. It was helpful to see that the Tribunal (much as in the above case) determined that where there is a 10 year term, a break exercisable by the site provider on 18 months’ notice expiring from the fifth anniversary of the term was permitted.
The major point for debate and analysis of previous Tribunal decisions in this case was rental valuation of the site as an “unexceptional rural site”. It should be noted that here the parties eventually agreed that the site had no alternative use value and so that would not affect the valuation analysis. What would affect the analysis, and was considered, included (i) the size of the site (ii) access (and therefore levels of operator activity) (iii) inflationary impact.
The Tribunal was persuaded that the previous rental starting point for unexceptional rural sites which was at £750pax was no longer appropriate. In light of inflation and evidence of non-telecommunications transactions for unexceptional rural sites (subject to adjustment for the hypothetical no-network assumption required by the Telecoms Code) enabled the Tribunal to conclude that “the appropriate annual consideration for a rural mast site is £1,750”.
Accordingly, that should become the new starting point for rents on rural sites, however each site is different and as in all valuations, expert advice should be obtained.
