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In good news for landowners and landlords, a key recent decision of the Upper Tribunal has increased the rent that telecoms operators will have to pay for the siting of masts on “unexceptional rural sites”. The case also provides useful guidance on the rights of landlords/landowners who require a redevelopment break right to be included in new leases.
Background
The decision was published on 29 July 2024 and relates to a renewal lease of a greenfield telecommunications site at Vache Farm near Chalfont St Giles in Buckinghamshire (Site).
The equipment on the Site consisted of a 20m high steel mast which was in a fenced 16m x 6m enclosure in a field. There were also several cabins housing telecoms apparatus. The parties to the lease were EE as tenant, and APW (also a telecoms company) as landlord. After the contractual term of the original 15-year lease expired in May 2020, the lease continued under the provisions of the Telecommunications Code (Code).
Code Reminder: a lease that is subject to Code rights (generally most telecoms leases) will continue even after the contractual term ends, unless a prescribed procedure to terminate is followed.
The parties could not agree on the renewal terms for the rent or the redevelopment break right and so the matter was referred to the Tribunal.
Rent for Unexceptional Rural Sites
The tenant, EE’s position was that the annual rent should be based on the figure of £750 per annum. This was taken from several 2022 cases which set £750 as the precedent rent figure for unexceptional rural sites[1]. EE’s surveyor conceded that the £750 should be increased to allow for inflation, taking it to £977, which they rounded to £1,000.
APW’s case was that the rent should be £2,850 per annum, and they submitted detailed valuation evidence that the rent of £750 was too low based on market comparables, and the good access and size of the Site.
The Tribunal took the opportunity to revisit the appropriate rent for rural mast sites, which had not been considered since the 2022 cases[2]. The Tribunal set out the previous thinking on unexceptional rural site valuation and considered whether the guideline figures needed to be reviewed.
It was the first time that the Tribunal had carefully reviewed transactions in relation to setting a value for small rural sites in non-telecommunications use, which can then be used to get the no-network assumption value.
In summary, the Tribunal found that the previous case law determining a rural mast site rent at £750 was much too low. The found that inflation was particularly relevant to valuation and took into account the evidence on comparables for non-telecoms use sites. They concluded that the appropriate rent for this type of site is £1,750.
Redevelopment Break Right
The parties agreed on the principle that APW should have a right to terminate the lease on 18 months’ notice, but they disagreed on how the re-development right should be worded.
APW wanted quite a widely drafted break right to be available to them whenever:
“(a) the Landlord desires to redevelop all or part of the Communications Site or any neighbouring land or any land under the ownership or control of the Superior Landlord (the site owner); or
(b) the test under paragraph 21 of the Code for the imposition of the agreement on the Landlord is no longer met.” Effectively, this was a right to terminate the lease whenever they want to redevelop the Site, or neighbouring land, for any purpose and at any time.”
Code Reminder:
Paragraph 21 contains a 2-part test which sets out that for a Court to impose Code Rights. The Court must be satisfied that:
- Any prejudice caused to the landlord/landowner by imposition of the code agreement can be adequately compensated by money.
- The public benefit outweighs the prejudice caused to the landlord/landowner. If a Court is not satisfied that the test is met, then they do not need to grant Code Rights to the operator.
EE wanted a more limited break right requiring APW to show:
- a “settled intention” to develop the land; and
- that the land could not reasonably be developed without obtaining possession of the Site.
EE expressly excluded “providing or operating an electronic communications network, or electronic communications services, or the provision of an infrastructure system” from the definition of “development”, as they did not want APW to try and take the benefit of the Site for their own purposes.
The Tribunal decided it was not the Code’s intention to stand in the way of the genuine redevelopment of land, regardless of whether that was for telecommunications purposes or not – and regardless of whether the operator enjoyed more favourable terms than before the lease renewal. The Tribunal refused to impose restrictions on the meaning of the word “development”.
The Tribunal’s imposed break clause wording was a compromise between the two positions:
“The break clause will therefore provide that the Landlord may terminate the new lease on giving 18 months’ notice expiring on the fifth or any subsequent anniversary of the term commencement date if it intends to redevelop all or part of the Site and could not reasonably do so while the new lease continues.”
Comment
This case provides helpful valuation guidance for unexceptional rural sites on which a vast majority of telecoms apparatus is situated and serves to increase the previous “base” rent of £750 to £1,750.
It also clarifies the position with regards re-development for landlords/landowners, which is that the presence of telecoms apparatus should not prevent development on land, even where that could lead to less favourable lease terms for the operator.
Should you wish to discuss any of the issues raised in this article, please contact Charlotte Curtis.
[1] EE Ltd and Hutchinson 3G UK Ltd v Stephenson and another [2022] UKUT 180 (LC)
[2] where they did so in the following two cases: EE Ltd and Hutchison 3G UK Ltd v. Affinity Water Ltd [2022] UKUT 8 (LC)) and EE Ltd and Hutchison 3G UK Ltd v. Stephenson and another [2022] UKUT 180 (LC)).
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