Electronic Communications leases and the new Electronic Communications Code (the Code)
By Fiona Buckland
Leasing out rooftop areas and unused land to electronic communications operators may seem an attractive option for landowners, providing them with a regular source of income for formerly unoccupied space.
However, the Digital Economy Act 2017 introduced a replacement Code into the Communications Act 2003 which is a statutory regime applying to new leases created on or after 28 December 2017 and retrospectively to existing leases by court order, which will give landlords food for thought when considering a new telecommunications lease. Not only will it bind original parties to that lease, but also successors in title and even superior landlords in certain circumstances, so the decision whether to grant such a lease will have a far-reaching effect.
The purpose of the Code is to stimulate improved connectivity and growth in the electronic communications market, granting operators greater freedom and protection than under the previous code. Yet the reforms may have an adverse effect on landlords, reducing their rental income and limiting their control over their own properties.
Unlike a normal business tenancy, it is not possible to contract out of the Code. It provides for long notice periods and specific termination and equipment removal procedures before a landowner can regain possession, which may be detrimental for landlords seeking to develop. Fortunately an operator cannot rely on protection from both the Code and the Landlord and Tenant Act 1954 (LTA). If the primary purpose of the lease is not the grant of Code rights, the LTA will apply and the lease can be contracted out in the usual way. Alternatively, the lease should say if its purpose is to confer Code rights, as ‘primary purpose’ is not a defined term under the Code.
In addition to almost unrestricted rights to assign the agreement, share the site with other operators and upgrade apparatus without obtaining landlord consent, the most surprising of the reforms is that the land’s use for electronic communications purposes and the impact of Code rights will be ignored for valuation purposes. By seeking to equalise the disparity in rental levels in telecommunications leases compared to other utility providers, the Code may reduce the rent achievable by landlords, and consequently their willingness to grant such leases.
Therefore, while the new Code aims to promote an efficient and digitalised economy, landlords may find themselves burdened with a lack of control over who occupies their land, how, and for what price. Clear advice at an early stage is vital. TWM’s Commercial Property team are experts in business and telecommunications leases, assisting landlords to fully understand the ramifications of the new Code.
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