**The original lease was held by EE and related to a telecommunications site situate at a water tower. That original lease had expired in 2018. The lease had been contracted out of the Landlord and Tenant Act 1954 (‘the Act’) and was, as a result, not afforded the security of tenure provided by the Act. Notwithstanding this, EE were afforded protection under the New Electronic Communications Code (‘the Code’) which had come into force in December 2017 and continued to exercise Code rights. **

What are Code rights?

Code rights are contained in paragraph 3 of Schedule 3A to the Communications Act 2003.

Code rights relate to electronic communication apparatus and include rights to:

• Install electronic communication apparatus on, under or over the land.
• Keep the electronic communication apparatus installed on, under or over the land.
• Inspect, adjust, alter, maintain, repair or upgrade the electronic communication apparatus and carry out works for or in connection with the same on the land or elsewhere.
• Operate electronic communication apparatus and carry out works for or in connection with the same on the land or elsewhere.
• Enter the land to inspect, maintain, adjust, alter, repair, upgrade or operate any apparatus which is on the land or elsewhere.
• Interfere with or obstruct an access.
• Connect to a power supply.
• Lop vegetation that is interfering or may interfere with the electronic communication apparatus.

The case

EE applied to the Tribunal under paragraph 34, Part 5 of the Code and asked the Tribunal to determine both the consideration (i.e. the rent to be paid to the site provider for the lease) and the compensation (also payable to the site provider and intended to cover any financial losses or to compensate for damage sustained) for a new agreement.

Paragraph 23(3) of the Code states ‘The terms of a Code agreement must include terms as to the payment of consideration by the operator…’ Paragraph 24 of the Code sets out how consideration is to be determined under paragraph 23.

A site provider can attempt to claim numerous types of compensation as a result of a telecoms provider occupying the land being afforded Code rights. A claim is to be made under paragraph 25 of the Code. A claim can be brought in response to any loss or damage suffered and one example is a claim for the diminution in the value of the land.

When considering the consideration element of EE’s claim, the Tribunal in this case acknowledged that paragraph 24 of the Code was applicable when valuing the consideration payable for the purposes of Parts 4 and 5.

EE and Affinity Water had already reached an agreement that the site in question should be assumed to be equipped for the purposes of determining the consideration payable by EE. However, the Tribunal confirmed its view to be that for the purpose of paragraph 24 valuations required by Part 5, the site in question should actually be assumed to be vacant. This was notwithstanding the fact that cases engaging part 5 almost invariably relate to equipped sites.

The Tribunal noted that there was no indication in paragraph 34 that the approach set out in paragraph 24 should be modified. The Tribunal explored the parties' consensus on this point and it was noted that this could be an important point in future cases.

In reaching its decision, the Tribunal noted a number of cases providing guidance on the levels of consideration to be paid for a Code agreement. However, where the parties in these cases had managed to reach consensual agreements, the basis often proved difficult to analyse.

It remained unclear whether credible adjustments were possible to account for differences between consensual and imposed transactions to enable agreed rents to be used as comparables when a tribunal was actually determining the consideration.

The Code agreement in this case related to a site at a water tower – not the usual green or urban rooftop site. The Tribunal reached the decision that the statutory hypothesis set out in the Code should be applied to a water tower site on the basis that it falls somewhere between a green site and an urban site. It is likely that this application would also extend to other structures such as church steeples, windmills or wind turbines.

In applying this hybrid approach, the Tribunal first applied the structured valuation approach developed in the Hanover Capital case followed by application of a sense-check which involved an assessment of the provisional rent against evidence of the rents set in other cases concerning different types of telecommunications site. Particular attention was given to green space sites and urban rooftop sites given that a water tower site had been determined to sit somewhere between the two.

The Tribunal confirmed that compensation in this case was to cover professional fees incurred before the tribunal made its order and that was on the basis that those fees were incurred as a result of EE exercising its Code rights.

What does this case tell us?

This decision is helpful to parties trying to negotiate the terms of a Code agreement as it confirms the following:

That sites should be assumed to be vacant for the purposes of valuations under paragraph 24. This clarification will assist operators and occupiers in agreeing terms that are less likely to be disregarded by the Tribunal.

Roughly where within the statutory hypothesis water towers (and potentially other such structures) sit. The issue of sites being neither green space or rooftop sites is likely to become more and more prevalent as operators seek to expand their networks to reach as many consumers as possible.

Key contact: Jessica Dickinson | Tel: 01482 324252