Electronic Communications Code 2017: Another defeat for land owners in attempts to circumvent the provisions of the new Code

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One of the latest decisions to come out of the Upper Tribunal on the Electronic Communications Code 2017 (“the Code”), EE Limited and Hutchison 3G UK Limited v Trustees of the Meyrick Estate [2018], clearly shows that the Tribunal will give short shrift to site providers who devise schemes whose main motivation is to circumvent the provisions of the Code.

The case raises an interesting question regarding paragraph 21(5) of the Code, which provides that the Tribunal may not make an order imposing Code rights on a site provider where it intends to redevelop all or part of the land affected or neighbouring land and could not reasonably do so if an order was made.

The factual background in this case was fairly complex and the proposals shifted considerably through the course of the proceedings but the main thrust involved a large estate of some 5,600 acres in Hampshire held in trust for the Meyrick family for some three centuries (“the Trust”). The claimants, EE Limited and Hutchison 3G UK Limited (“the Operator”), occupied four masts on the Estate under leases which had expired.

Negotiations for a new 10 year lease took place in 2016 and continued to 2017 under the old Code. Heads of Terms were agreed and a draft agreement issued in November 2017 but on 4th December 2017 the Trust sought to add a new term which was not acceptable to the Operator. Negotiations ground to a halt and on 28th December 2017 the new Code came into force.

In March 2018, the Operator served notice on the Trust claiming rights under the new Code and, in the absence of agreement, commenced proceedings before the Upper Tribunal. The Trust’s statement of case resisted the claim on the basis that they planned to redevelop the site. However, this was not the usual redevelopment situation and the Trust was not proposing a commercial or residential redevelopment. Instead the scheme involved removal of the Operator’s 22.5 metre monopole mast from the site and the installation of a 35 metre lattice mast capable not only of supporting antennas belonging to the Operator and other operators but also the apparatus required for fixed wireless access broadband to serve the Estate.

Under the new Code, Code rights cannot be obtained over “electronic communications apparatus” such as a mast, since it is excluded from the definition of “land” in the new Code. Therefore, a site provider who provides his own mast cannot be subjected to Code rights and can demand whatever consideration he chooses and impose whatever terms he wishes. At the heart of this case was the question whether the Trust had a settled intention to carry out the redevelopment and, if so, whether their motive was to prevent the Operator from claiming Code rights. If this was the motivation, did this prevent them from claiming the protection of paragraph 21(5)?

The answer to this question had significant financial implications for the Trust: it estimated that the annual amount receivable from the Operator for rights on the new mast would be £12,000 in contrast with the then current payment of £6,192 payable under the old Code and the prospect of a much lower payment under the new Code.

In deciding whether the Trust could successfully resist the claim based on paragraph 21(5) of the Code the Tribunal drew on comparisons with the Landlord and Tenant Act 1954 (“the 1954 Act”) and applied the two stage test used where landlords are resisting the grant of a new lease on redevelopment grounds, namely:

  1. Does the site provider have a reasonable prospect of carrying out the current scheme of redevelopment?

  2. Does the site provider have a firm and settled and unconditional intention to put their current scheme into effect?

In this case the Tribunal found the first limb of the test satisfied. The Trust had obtained planning permission for their new mast and although doubts were expressed regarding the financial viability of the project (particularly in the light of the fact that the Operator had indicated that it would not be prepared to place its equipment on the new mast) the Trust had substantial resources and therefore had a reasonable prospect of being able by themselves and without the co-operation of others to carry out the scheme.

In relation to the second limb of the test, the Tribunal referred to the 1954 Act case of S Franses Limited v Cavendish Hotel (London) Ltd which determined that in assessing a landlord’s intention, “the acid test is whether the landlord would intend to do the same works if the tenant left voluntarily”.

In this case, the Trust claimed that their primary concern was the welfare of the Estate and that their priority was to provide decent broadband coverage which the Estate currently lacked. The Operator’s view though was that the scheme had been concocted purely to prevent them getting Code rights and the Trust did not intend to carry it out.

The Tribunal agreed with the Operator and concluded that the scheme was put together in response to the Operator’s application for Code rights in order to prevent them from getting those rights but that the Trust had no serious intention to carry it out. The Trust was not helped in its claims by several emails revealing its motivation, including the following to a mast provider:

“We want to invite the operators to put their equipment in our box so that they don’t have Code rights for the cabinet!”

 

The Tribunal was also influenced by the fact that, in spite of their claimed objective to improve broadband services to the Estate, the Trust had made no attempt to explore alternative ways of doing this before launching their own redevelopment scheme. They had not contacted the Operator nor the other operators on the Estate to express dissatisfaction with their broadband; they had not enquired as to whether they could place the fixed wireless apparatus on the Operator’s existing mast nor if they could co-locate their own mast on the current site. Regardless of whether any of these schemes would have worked the Tribunal found it significant that the Trust had not even explored them before devising a scheme to demolish a serviceable mast and replace it with another. The Tribunal considered this notion would be contrary to Government policy and “a colossal waste of resources”.

The Tribunal also expressed doubts as to whether the Trust had a firm and settled intention to carry out the redevelopment based on the evidence provided but concluded that, even if it did, this intention was conceived purely in order to defeat the claim for Code rights and therefore, following the decision in the S Franses case, the test was not satisfied.

Once again, the Tribunal, in reaching this conclusion made it clear that it would not allow the central policy of the Code – to enable Code operators to acquire rights and do so at a price calculated on the basis of assumptions favourable to them – to be frustrated. A redevelopment conceived purely to prevent the acquisition of Code rights which the site provider would not have pursued if Code rights had not been sought will not satisfy the test in paragraph 21(5). If this is the motivation behind a redevelopment scheme, then the site provider’s claim will fail.

If you'd like further advice about this please don't hesitate to contact a member of our Property Team.

RELATED:   EXPERTISE - REAL ESTATE


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