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The Telecoms Code - points for landlords
Telecoms facilities generate additional income for landlords and are an increasingly popular way of turning otherwise "dead space" to profitable use. However, landlords and estate managers need to be aware that telecoms operators enjoy special protection and powers under the Telecoms Code, which are in addition to any security of tenure they may have under the 1954 Act. It can therefore prove difficult to force a telecoms operator to remove its equipment at lease expiry and landlords need to bear this in mind when entering into any form of agreement with telecoms operators.
What are "Code powers"?
The Code is a set of rights and procedures that regulate the installation and retention of telecoms apparatus on land and buildings. The Code is contained in Schedule 2 to the Telecommunications Act 1984, as amended by the Communications Act 2003. Its underlying policy objective is to maintain network coverage for mobile and other communications, for the benefit of customers and business, but this can lead to undesirable outcomes for landlords, whose interests are subordinate to this objective in a number of important respects.
Three key Code powers for landlords to take note of are:
- Paragraph 21 of the Code, which permits operators to remain in occupation after contractual expiry of a lease or break notice and restricts landlords' rights to obtain vacant possession;
- Paragraph 20, under which landlords can request (but may not be able to force) modifications to the operator's equipment to permit re-development; and
- Paragraph 5, under which operators can in certain circumstances apply to Court to force through the installation of equipment which the landowner does not wish have sited on its land.
Who and what does the Code apply to?
OFCOM is responsible for granting Code powers to network providers and it maintains a register of those to whom the Code has been applied. All of the main landline and mobile operators enjoy Code powers but if there is any doubt in a particular instance, the register can be checked by contacting OFCOM.
In terms of the equipment to which it relates, the Code tends to come up most frequently in the context of mobile phone masts and related equipment. However, it is important to remember that the Code applies to fixed line operators too, so it catches things like underground cables, telephone exchanges and roadside cabinets as well. In fact, the Code catches all "electronic communications equipment", defined as "apparatus which consists of or includes the sending or receiving of communications or other signals transmitted by means of an electronic communications network"; it therefore has a very wide application indeed.
What protections do operators enjoy at lease expiry?
Paragraph 21 of the Code protects telecoms operators' occupancy rights. It states that operators can remain in occupation even after expiry of their lease or other agreement to occupy, such as a wayleave agreement for underground cables.
It is important to emphasise that this will still be the case even if the lease was contracted out of the 1954 Act, or the operator's occupancy rights were expressed to be granted by licence terminable on notice.
It is not possible to contract out of paragraph 21. Some site agreements contain an operator's undertaking not to rely on paragraph 21, but such undertakings are not binding and cannot override the Code.
If the landlord wants to obtain vacant possession from a telecoms operator, for example at lease expiry, what can be done? The first step must always be to serve the appropriate contractual and/or statutory notice to terminate the operator's tenancy or licence, in the normal way. However, in addition the landlord will need to serve a Code notice under paragraph 21 of the Code, requiring the operator to remove their telecoms apparatus. The notice must be in writing in a form approved by OFCOM. Although it need not specify a date for removal, if it does, then the date must be at least 28 days from service of the notice.
The operator is entitled to counter-notice and has 28 days in which to do so. Assuming that a counter-notice is served, the landowner will only be able to force removal of the apparatus by obtaining a court order. The court will not make an order sanctioning removal of the equipment until either the operator has exhausted its powers under section 5 to obtain a new agreement (see further below) or the court is satisfied that the operator is being unreasonably dilatory in seeking a new agreement under section 5.
If the operator is not diligent about protecting its position, and misses the deadline for counter-noticing, it will lose its Code protection under paragraph 21. However, it would be unusual for an operator to slip up like this.
Can the landlord exercise "self-help"?
The short answer is no. Removing telecoms apparatus without first serving a Code notice under paragraph 21 and obtaining a court order constitutes criminal damage and the landlord could face prosecution. Furthermore, the sensitivity of the equipment could expose the landlord to a substantial civil claim for damages as well.
Better news for landlords is that if the court makes an order sanctioning removal of the equipment, it will generally (a) require the operator to bear the expenses of removal and (b) authorise the landlord to sell the apparatus and retain the proceeds on account of those expenses.
What about forfeiture?
Operators are still protected by the paragraph 21 of the Code if their lease is terminated by forfeiture. Similarly, if the premises are let to a non-telecoms tenant who has granted a sub-tenancy to a telecoms operator, and the head lease is forfeited, it will still be necessary for the landlord to serve a Code notice under paragraph 21 and go through the process outlined above if vacant possession is required.
New agreements under paragraph 5
Aside from the protections they enjoy under paragraph 21, telecoms operators also have the right to make a paragraph 5 application for a new agreement at any time. Operators can use paragraph 5 to acquire rights in respect of new sites, but it is equally applicable where the operator wants to keep equipment installed at an existing site and the landlord is seeking vacant possession.
The operator triggers the process by serving formal written notice on the landowner of the rights required and giving the landowner 28 days to agree. After 28 days, the operator can apply to court for an order conferring the rights it is seeking.
In deciding whether to grant the rights the court has to perform a balancing act. It is required to weigh the prejudice which would be caused to the landlord if the rights are granted, against the potential benefit to users of the operators' network if the apparatus is installed. The court must do this in the context of the overriding policy objective of maintaining network coverage, in accordance with the principle that "no person should unreasonably be denied access to electronic communications services".
If an order is made in favour of the operator, the court will fix the terms of the agreement including the financial terms, which inevitably involves an element of subjective judgment. The courts will award a market rate, but have explicitly rejected the suggestion that the financial terms should be fixed on a "ransom value" basis as a percentage of the operator's expected profits.
"Lift and shift"
Paragraph 20 of the Code entitles landlords to serve notice on operators requiring the alteration of apparatus, if so required to permit development. However, as with Code notices under paragraph 21, operators have 28 days in which to counter-notice and if they do so, the landlord cannot force alteration or re-location of the apparatus without obtaining a Court order. The court will only make an order in favour of the landlord if it is satisfied that the alterations (a) are necessary to permit development and (b) will not interfere with the operator's network services. If successful in obtaining an order, the landlord will be ordered to bear the operator's costs of the alterations.
Landlords who are "relevant undertakers" as defined in the Code (including statutory undertakers of railways, waterways, docks and harbours) have additional rights which may make it easier for them to force through alterations to telecoms apparatus. If the alterations are genuinely needed for the purposes of "undertaker's works", then the undertaker can serve a Code notice on the operator under paragraph 23, requiring the alterations to be made. The operator has the right to elect to do the works required itself, at the undertaker's cost. If the works are done by the undertaker, it will be liable to compensate the operator for any damage to its apparatus. It should be emphasised that it is a criminal offence for the undertaker to execute works without serving the required notice under paragraph 23.
Conclusion - commercial realities
Experience to date suggests that operators will tend to seek a negotiated solution rather than relying on Code powers and if the landlord genuinely requires vacant possession for redevelopment, operators will usually make efforts to arrange an orderly relocation. However, they will want to ensure that network coverage is not disrupted in the meantime. Relocation can be a lengthy process (typically taking two years or more) and landlords should expect that operators will at the very least use the threat of invoking Code powers to buy the time they need.
The key message is therefore that landowners need to be aware of the protections afforded by the Code, both before entering into any form of agreements with telecoms operators (however "informal"), and also as lease expiry approaches. Where vacant possession is going to be required for redevelopment then landlords would be well-advised to open relocation discussions with operators at the earliest possible stage.
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