The Electronic Communications Code – Tribunal Makes First Decision on Consideration

Posted: February 22, 2019 by Karen Kipling
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On the 18th February 2019 the Upper Tribunal (Lands Chamber) published their decision in a case of EE Ltd. and H3G Ltd v the London Borough of Islington.  This case had already been heard by the Tribunal in November which granted interim code rights but was now being assessed for consideration and compensation.

The case concerned Threadgold House, a 10-storey block of flats with a flat roof owned by the London Borough of Islington.  EE and H3G needed equipment as their existing site was on a building which was about to be redeveloped.

Before the new code, both parties had negotiated an agreement in principle for a payment of £21,000 per year but the agreement wasn’t completed before the new code was introduced.

LEASE OR LICENSE

The Tribunal directed the parties to negotiate Heads of Terms before the date of the hearing in an effort to agree as many points as possible and focus the Tribunal’s attention on the key points of dispute. Instead of negotiating the Heads of Terms, the property owner prepared a case contesting the Tribunals right to impose a lease, instead arguing that it should impose a lesser right such as a licence.  The Tribunal rejected the claim and were satisfied that it could impose a code right as a leasehold interest in land.

Because the Heads of Terms had not been negotiated, the Tribunal granted a lease based on the terms proposed by EE and H3G, namely a 10-year lease terminable after 5 years, for which consideration would be reviewed by inflation after 5 years.  Because the terms were not negotiated thoroughly the Tribunal made it clear that this should not be represented as signifying that the same terms will be imposed on other cases.

CONSIDERATION

They then assessed consideration applying what they called a ‘no-network’ assumption.  In the Heads of Terms, the operators had proposed a payment of £2,551.77 per annum as consideration. The property owner’s agent sought a rent of between £10,000 and £13,000 when compared to storage rents, while the operator’s agent suggested a figure of £1 because there would be no bidders in the market when using a no-network assumption.

The tribunal decided it would be wrong to assume that without competition in the market there should be a nominal £1 value, instead they concluded a £50 value was appropriate.

They also investigated the service charge levied on the residents at £1,300 and decided that the operator should pay their share for the services they use, such as the lift and fire alarm. They also allowed for a contribution to roof repairs and eventually concluded £1,000 per year was an appropriate valuation.

In this case though, as the operators had offered a payment of £2,551.77 and were willing to honour it, the tribunal decided this higher figure would be a fair settlement.

COMPENSATION

In assessing compensation, all of the property owner’s claims were initially dismissed, many of them were already provided for in the lease wording, while many others were based on assumptions about future losses that could be incurred.

The operator’s agent tried to argue that compensation is only payable once at the start of the lease, but rather than assuming the likelihood of future losses, the Tribunal decided that any matters arising which would be eligible for compensation could be referred to the Tribunal at that time. For example, if the operators caused damage while installing or removing their equipment, a compensation claim will be prepared at that time and could be referred to the Tribunal if it cannot be agreed.

The same process was applied to professional fees, the owner’s reasonable professional fees for reaching the agreement could be claimed against the operator, but time spent objecting to the mast could not. The Tribunal asked the parties to negotiate the fees but allowed them to return to the Tribunal if they can’t reach an agreement.

On numerous occasions the Tribunals comments noted that each case must be assessed on their own situation and so it is unclear how much of this case may be compared to agreements on other properties.  Interestingly, the Tribunal acknowledged Government’s intention for mast rents to decrease when assessing consideration, but while assessing compensation stated that (in paragraph 130) “There is nothing in the Code … to require the owners of suitable sites to bear part of the cost of providing networks through being deprived of fair compensation for any loss or damage which they suffer as a result of the exercise of Code rights.”

We continue to await any further decisions to see how other aspects of consideration and lease terms are to be dealt with. This case was assessed on its own merits, so the precise numbers involved cannot be directly applied to other instances, yet it offers a methodology which can be explored further by property owners and operators alike.

If you own a mast site or have been approached by an operator, please get in touch to see how we can help.

Chris Thyer

Rural Associate Director

MRICS FAAV

Email: ct@gscgrays.co.uk

Tel: 01833 694934