New Telecommunications Code might cause difficulties for developers

Long considered to be complex, anachronistic and in need of reform, the old Telecommunications Code has been repealed and replaced by a new Code which applies to all agreements entered into on or after 28 December 2017. The new Code applies to agreements entered into prior to such date subject to certain modifications.

It was hoped that the new Code would not only provide much-needed clarity but also take into account the interests of all affected parties. However, while it addresses some of the issues which arose under the old Code, the new Code introduces a number of significant changes which primarily benefit operators and are expected to cause difficulties for developers.

Notable changes include:

1. Assignment: Operators can now automatically assign their rights to another operator without the need to obtain consent or provide payment. Any attempt to prohibit or restrict an assignment will be void, although an outgoing operator can be required to provide a guarantee agreement in respect of the initial incoming operator (but not in relation to its successors).
2. Upgrading and sharing: An operator may upgrade or share its apparatus with another operator provided doing so will have no or no more than a minimal adverse visual impact and there is no additional burden to the other party, which includes any effect on their enjoyment of the land and any loss, damage or expense. As with assignments, any terms which seek to restrict, or impose conditions on, upgrading or sharing will be void where these two conditions are met.
3. Court agreements: As under the old Code, the Court may confer rights on an operator under paragraph 21 if two conditions are met, namely the prejudice caused to the other party can be compensated financially and the public benefit of the order outweighs the prejudice. The Court can also grant an order for a temporary agreement if these conditions in paragraph 21 are met. However, a positive change under the new Code is that the Court may not make an order to confer rights on an operator if it thinks that the affected party intends to redevelop all or part of the land and could not reasonably do so if the order were made.
4. Rent: The rent payable under a Court-imposed agreement will now be based on market value. This is likely to result in lower rental incomes since the special value of the land to the operator will not be taken into account.
5. Rights of first refusal: The new Code helpfully confirms that the conferral of a Code right will not constitute a relevant disposal and will therefore not trigger the tenants' right of first refusal under the Landlord and Tenant Act 1987.
6. Termination and variation: Another welcome clarification under the new Code is that Code agreements will no longer enjoy security of tenure under the Landlord and Tenant Act 1954. However, one of the most controversial changes to be introduced is the requirement to serve at least 18 months' notice on an operator to terminate a Code right (as opposed to just 28 days' notice under the old Code) and at least six months' notice to vary one. The Code does however still refer to "redevelopment" as one of the grounds on which termination may be sought. An operator will have three months from the date of the notice to serve a counter notice.
7. Removal: The removal of apparatus is generally now a two stage process – first the agreement must be terminated before a notice requiring removal and restoration of the land within a reasonable time period is served. A landowner must wait 28 days before applying to court for an order requiring removal where no agreement is reached with the operator.

It is important to note that it is not possible to contract out of the above provisions. It will therefore be vital for developers to factor in the extended timescales which now apply in relation to termination and removal and their lack of control over who occupies or shares a site when considering redevelopment plans.

However, while the new Code arguably fails to strike a balance between the rights and interests of landowners and operators, it is worth remembering that Court cases involving the old Code were very rare and, in practice, operators have tended to exercise their Code rights as a delaying tactic in order to find an alternative site. Further, Ofcom has also issued a Code of Practice which encourages co-operation between operators and landowners. The Code of Practice, however, is not legally binding and it remains to be seen whether operators will choose to fully utilise the extended timeframes granted to them. Developers may find that offering attractive financial incentives remains the most effective way to secure removal.

If you require further information on anything covered in this briefing please contact your usual contact at the firm on 020 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP,  March 2018