Renewing telecoms agreements: Code rent now payable from the start of proceedings

7 minute read
03 November 2023

Following the Government's aim to support the rollout of high-capacity 5G networks and increase connectivity in a way that balances the interests of landowners, telecoms operators and the public, the Product Security and Telecommunications Infrastructure Act 2022 (PSTIA 2022) was brought into force on 6 December 2022.

PSTIA 2022 makes a number of changes to the Electronic Communications Code 2017 (the Code) after various telecommunications issues were identified as needing reform. This article focuses on section 68 of PSTIA 2022, which will be brought into force on 7 November 2023.

Explaining the change in legislation

The effect of section 68 PSTIA 2022 (which amends paragraph 35 of the Code) is to permit parties to apply for a Code rent to be payable from the date an application is made for the termination, amendment or renewal of a telecoms agreement.

At present, if an operator or site provider has applied for an order under Part 5 of the Code, the operator will continue to pay the passing rent under the existing telecoms agreement until ordered otherwise.

What impact will this have?

The Code requires rent payable under new telecoms agreements to be subject to the "no-network assumption". This means that when determining the level of rent payable by the operator, the market value must be calculated on the basis that the transaction does not relate to the provision/use of an electronic communications network.

The impact of this is that the typical market forces of supply and demand (i.e. how much the operator is willing to pay for the site, versus the payment the site provider is willing to accept for having a mast on its land), do not apply. The effect of this statutory valuation mechanism is that rental levels have significantly dropped from pre-Code levels. Rental levels are now largely based on a rate card originally contained in the Affinity Water case. A copy of the rate card is below[1]:

Decision Type of property/location Annual consideration
CTIL v London and Quadrant Housing Trust City, residential rooftop £5,000
CTIL v Marks & Spencer plc (Lands Tribunal for Scotland) City, department store/offices £3,850
Affinity Water Limited Suburban residential, water tower £3,300
Dale Park Rural, adjacent to housing £1,200
CTIL v Fothringham (Lands Tribunal for Scotland) Rural, no nearby housing £600 (£1,500 in year of installation)

Following the changes to the Code, operators will be able to apply for the new rent to apply from the date of their original application. Given that proceedings can take between six to eighteen months to conclude, the ability to obtain a lower rent from the start of a reference represents a significant advantage for operators.

The changes align the Code more closely with The Landlord and Tenant Act 1954 which also permits the new passing rent to be payable from before the court orders a renewal lease – this is known as interim rent. The 1954 Act regime, however, permits the new rent to be payable from the earliest date that could have been included in the tenant/landlord's statutory notice. By contrast, interim rent under the Code can only be claimed from the date tribunal proceedings are first commenced.

How might operators and site providers respond to the changes?

  1. Operators may elect to:
    1. issue proceedings against site providers more promptly, given they will be entitled to apply for interim rent to be payable from this point;
    2. routinely apply for interim rent orders when proceedings are issued as rents will invariably be lower. Operators may also wish to apply for interim rent where renewal proceedings are afoot in the tribunal – although this will likely depend on how close to trial the proceedings are; and
    3. use the ability to claim interim rent as a negotiation tool to incentivise site providers to agree a new deal before proceedings are issued.
  2. Site providers may elect to:
    1. seek to delay the issuing of proceedings for as long as possible so that they can continue to benefit from the possible higher rent up until this point; and
    2. conclude proceedings more quickly in order to save costs. Before 7 November 2023, site providers may have been incentivised to draw out tribunal proceedings, as doing so would delay the date from when they would receive the – likely lower – Code rent. This incentive has now been removed.

Ultimately, the changes to the Code display the Government's support for the rise of the digital economy, which requires an efficient route to significantly increase infrastructure and rollout high-capacity 5G networks.

Modifying other clauses

An operator or site provider may also apply to the court under paragraph 2A(b) of section 68 for an order modifying other terms of the existing code agreement. This is useful to operators where an existing agreement contains other restrictive terms which cause immediate difficulty, such as terms restricting assignment, upgrading or sharing. Operators may, therefore, elect to apply to modify these restrictive terms at the point of issuing rather than waiting for the full renewal of the agreement.

Other changes being made to the Code

Section 69 has resulted in Ofcom consulting on proposed changes to the paragraph 20 and paragraph 33 notices to include information relating to ADR. Practitioners should ensure that they use the correct form of notice with effect from 7 November 2023.

To discuss any of the issues raised in this article, please contact our real estate litigators Martin Thomas, Emilie Beek or Christy Morgan.


[1] EE Ltd and another v Affinity Water [2022] UKUT 8 (LC)

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