The Digital Economy Act 2017 received royal assent on 27 April 2017 and introduced, a new Electronic Communications Code, to those in the know it has been labelled……The 'New Code'.
Well not quite – it won’t actually be used until the secretary of state issue regulations to bring it into effect and no indication has yet been given of when this might be.
Ofcom is currently consulting on a proposed Code of Practice for telecoms operators and a number of template notices and standard terms that can be used alongside the New Code, so it may be that the outcome of this consultation will feed into regulations to bring the New Code into force.
The New Code is contained in Schedule 1 of the Digital Economy Act 2017.
This looks very much like a midway house between the Electricity Act and Water Industry Act. Could it be that Telecoms are now seen as the Fourth Musketeer within the utility pack?!?
The introduction of a Standard Practice Guidance pack would suggest yes!
Although not yet in force the prospect of the New Code may start to influence negotiations for New Code leases.
Key changes to the act are as follows –
The New Code makes some significant changes to the existing legislation and needs to be reviewed carefully by both landowners and operators. The key provisions of the New Code are:
- Telecoms leases are removed from the gambit of the Landlord and Tenant Act 1954 and therefore will not benefit from security of tenure under that Act. This means that landowners no longer need to proactively seek to exclude telecoms leases from the security of tenure provisions of the Landlord and Tenant Act 1954. However, the powers in the New Code granted to telecoms operators cannot be contracted out of, so telecoms operators will still benefit from an alternative form of security of tenure under the New Code.
- New telecoms leases will not be limited in terms of the rights the telecoms operators have to assign the lease in future or impose any conditions for such assignment (except for requiring a guarantee on an assignment if appropriate) to another telecoms operator.
- Telecoms operators will have a right to share occupation of the relevant land with other operators. It is not clear whether landowners can require a further licence fee or 'payaway' in such circumstances as a condition of their leases. This is likely to be defined within the standard processes being reviewed currently. Currently landowners expect a share of the payaway or licence fees where a tenant under a telecoms lease shares occupation with another operator. This change in the New Code could restrict the income received by landowners going forward and reduce the expenditure of the operators for telecoms sites.
- Telecoms operators will have a right to upgrade equipment under the New Code powers. This is caveated with “no more than a minimal adverse impact” on the appearance of the equipment and place no extra burden on the landowner. Thus leaving an ambiguous issue of “minimal adverse impact”
- Telecoms leases granted under the New Code will include an overriding interests, binding successors in title even where they have not been registered at the Land Registry. This for the operator gives greater freedom to access the site and complete site works. However, when acquiring land as a landlord, it is important to carry out suitable due diligence to establish whether there are any telecoms rights affecting the land. This will need to include whether leases for telecoms masts or rights to lay cables underground. It is likely that without the need to register telecoms leases and with the ability to freely share occupation, it could become more and more difficult for landowners and purchasers of land to keep track of who is in occupation.
- Rent calculations are now to be calculated by reference to the open market value of the land in a non scheme world. Meaning that the value is calculated without the presence of the telecoms equipment. This means that the land or roof space to be leased is valued as it is without the equipment for its current use, ignoring the special value of it to the telecoms operators. This may well suppress rental income, however it is likely that alternative review sources will be sort by the landlord such as access costs.
- In order to terminate a lease granted under the New Code then a landowner will have to provide at least 18 months’ notice to terminate the New Code rights and the contractual term of the lease must have expired by the end of that 18 month period. The landowner must also satisfy one of the following conditions:
7.1 That the lease ought to come to an end as a result of substantial breaches by the operator of its obligations under that lease
7.2 That the lease ought to come to an end because of persistent delays by the operator in making rent payments
7.3 That the landowner intends to redevelop all or part of the land on which the equipment is based and could not reasonably do so unless the lease comes to an end, or
7.4 The telecoms operator is not entitled to a New Code protected lease because it has not satisfied the test referred to in paragraph 6 above.
If these grounds are satisfied, then the court must order that the New Code protected lease comes to an end.
Interestingly, prior to the New Code being released into the system – Telecoms operators are highly likely to delay completion of any lease renewals.
If they are entered into it is highly likely a short term lease will be used to ensure that the new case valuation method can be triggered shortly.
For operators, holding tight until the New code is released is key.
For the landlord, negotiate that new lease and keep the term as long as possible.
By Sophie Aylward