Why the new Electronic Communications Code could require urgent action from landowners

Tuesday 21st June 2016

The new Digital Economy Bill announced in May’s Queen’s Speech will have wide-ranging consequences across the UK, with one notable inclusion being the new Electronic Communications Code.

The revised code will set out a new series of rules governing electronic communications infrastructure, including the construction and operation of mobile phone masts.

Chief among the changes will be the way in which landowners with mobile phone masts on their land are compensated, which will not only affect new installations, but could also have a significant impact on agreements involving existing masts.

A key aim of the Digital Economy Bill is to substantially increase coverage of 4G and mobile services across the UK, and one way of achieving this is by expanding the size of the network by building and upgrading masts.

According to the government, putting more power in the hands of telecoms companies could speed up this process and assist projects such as the expansion of BT’s EE network to replace the emergency services radio system, which could save taxpayers an estimated £1m per day.

Communications minister Ed Vaizey says that what was once seen as a luxury is now a basic need, with consumers and businesses expected to have access to fast broadband at home, irrespective of where they live, and use their mobile devices anywhere they go.

Boosting the economy

There is no doubt that the success of the economy is now reliant on having fast and reliable broadband and a solid mobile network infrastructure in place, but the new legislation looks set to create a major power shift from landowners to telecoms companies.

Disputes between landowners and mobile and mast operators will now be referred to the Land Chamber of the Upper Tribunal, which will be responsible for determine the level of compensation, rather than the current system that involves a range of bodies.

By granting stronger compulsory purchase powers to operators that are more akin to those electricity and water companies have, the ability for landowners to negotiate favourable deals could be reduced significantly.

Under the new proposals, both mobile operators and independent mast operators struggling to find suitable sites for new masts or encountering resistance from landowners can use the powers imbued by the new code to force landowners to free up the land.

Furthermore, the compensation for the land in question will be determined by using a ‘no scheme’ rule that reflects the true underlying value; in short, it will not be affected by any potential increase in revenue that the telecoms company could gain from building the mast.

Changing fortunes

The decision has been informed in part by the suggestion that some landowners were profiting from selling the space by charging vastly more for the land than they would have done if it were used for other purposes, in the knowledge that telecoms companies’ pockets are generally deep.

However, in some cases the charges were so high that some mast operators were being put off building altogether, resulting in coverage blackspots in some areas: something the government wants to avoid.

There is no question that improved coverage across the UK is a good thing, particularly in rural areas where it is historically poor, but landowners and agricultural bodies claim that the shift in power is inordinate.

According to Strutt & Parker telecoms specialist Robert Paul, a small 10m x 10m area worth around £8,000 a year under the current system could be worth less than £300 a year under the new compensation proposals.

As well as a significant reduction in income, costs for landowners could also be escalated due to the lengthy tribunal process that may be involved in determining the rate of compensation.

Currently, the mobile industry argues that problems involving contracts are rare, and that the probability of negotiations going to tribunal are slim, but with substantially reduced fees at stake, landowners’ power to negotiate a reasonable rate will be diminished.

In even cases where rents are being negotiated amicably, proper valuation advice will need to be taken on how the rents are arrived at.

The CLA claims that the new process, which is designed to reduce disputes and speed up the erection of masts, could actually have the opposite effect by significantly reducing the amount of discussions that are entered into in the first place, which will in turn disrupt the market and rollout of 4G.

Another key factor is that existing agreements may also be affected, particularly where contracts are coming up for renewal and landowners will no longer be in a position to charge elevated rates, with mobile operators aware of the legislation coming into force.

Race against time

In these circumstances, the countdown is on to negotiate new, favourable deals that can be completed before the introduction of the legislation.

Landowners may also be affected by operators’ new rights to upgrade and share masts with other companies, without prior agreement with the landowners, providing there is no adverse visual impact.

The government has stated that the revised code will only apply to new agreements between operators and landowners, but a new set of transitional provisions will be brought forward to set out exactly how and when existing agreements will be transitioned and how dispute resolution will apply to this.

Consideration will now also need to be given to leases on potential development sites, as it could create barriers to redevelopment of property in the future, creating an additional concern.

A date is yet to be set for the introduction of the new code, but with pressure on network providers to boost coverage and the government keen to expand the country’s broadband and mobile network to make the Digital Economy Bill a reality, the countdown is on for landowners to conclude existing negotiations and finalise new ones to avoid losing out.

If you need legal advice on commercial property matters, including property finance, please contact Simon on 01274 202514 or simon.mydlowski@gordonsllp.com. For more information about us please visit www.gordonsllp.com/sectors/retail-lawyers/.