April 30, 2014

Commercial Property e-Brief – Recovering land from telecommunications providers: What to be aware of

With the rental value of commercial property freefalling and the stagnation of the residential development market, inevitably the last few years of economic downturn have led landowners to look at ways of diversifying income streams from their properties.  One common option has been to grant leases or enter agreements with telecommunications operators (“an Operator”) to place equipment on derelict development land or the roofs of commercial buildings.

While this can provide a steady income or a welcome capital payment, because of the ‘public service’ that Operators are deemed to provide, this must be balanced against the reality that landowners often struggle to get rid of Operators even after the expiry of the relevant agreement.

LANDLORD AND TENANT ACT 1954

As with any commercial lease, a lease of land to an Operator will enjoy security of tenure under the Landlord and Tenant Act 1954 (“1954 Act”) unless it is specifically excluded.  This means that at the expiry of the term of a lease, the Operator has an automatic right to renew the lease on substantially similar terms, unless the landowner is able to establish one of a number of grounds (such as redevelopment or own occupation).

THE TELECOMMUNICATIONS CODE

In addition to any 1954 Act security of tenure, all leases, licences and agreements with an Operator enjoy further statutory protection under the Telecommunications Code (“the Code”).  Unlike the 1954 Act you cannot contract out of this additional protection and therefore Operators will always be able to fall back on its protection.  The Code gives the Operator a right to stay put unless the court is satisfied that:

  • There is a proposed improvement or redevelopment of the land;
  • It is absolutely necessary for the Operator to vacate the site to enable the improvement.  It is not enough to show that it would be convenient or cost effective; and
  • The alteration will not substantially interfere with any service which is or is likely to be provided using the operator’s network.

Together this is often a difficult test to satisfy.

COMPENSATION

Even if the court is persuaded that the Operator should vacate a site, it will usually require the person who made the application to reimburse the Operator for any expenses incurred in connection with the execution of any works in compliance with the order.

Such expenses do not need to be reasonable and it is not clear whether they are confined to the immediate expenses of relocation (which in themselves could be significant), or whether they extend to other losses of the operator such as penalty clauses for not keeping the network working or loss of income from customers who move to other networks.

If you would like to know more please contact our commercial property team.