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Renewing telecoms agreements - further guidance

View profile for Charlotte Strutt
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Following our September article ('4G or not 4G? That is the question…'), the case of Vodafone Ltd v Hanover Capital Ltd heard by the County Court (sitting in the Upper Tribunal) has offered new help for landlords in what was the first decision on the interaction of the Electronic Communications Code 2017 and the Landlord and Tenant Act 1954.

In a prior decision, the Tribunal itself had already stated that renewals of subsisting telecoms agreements should be dealt with under the 1954 Act rather than Part 5 of the Code. However, up until now there was no guidance on how to deal with term length or how the rent should be valued.  Although the Code was put in place in order to make it easier to roll-out better mobile and broadband coverage across the country, and especially in rural areas where it is lacking, the Code was drafted very much in favour of the telecoms operator rather than the landowner landlord. A new telecoms agreement under the Code could lead to considerably lower rents with the landowners feeling like they did not have much choice in the matter.

However, this landmark case now strikes a bit more of a balance in situations where there is a renewal. Vodafone were seeking a three year term with a break clause exercisable by them on six months' notice at any time during the term. Hanover wanted a ten year term with a break right exercisable by Vodafone after five years, as this allowed them more certainty. Vodafone were also seeking to use a 'no network' assumption when determining the rent - this is often used under the Code and is the reason that lower rents can be arrived at due to the fact that the land is valued in terms of its use to the landowner, rather than taking into account the value of the site to the telecoms operator. Vodafone put forward that the land was only able to be used by Hanover as a car park, whereas Hanover argued the value of the site to the other telecoms operators that in fact shared the site was much more than this. Hanover's basis for their argument was that renewals under the 1954 Act required the rent to be valued in accordance with a hypothetical transaction on the open market.

In a positive move for landowners, the Court was on Hanover's side regarding both the length of the term and the rental valuation. A term of ten years with a break right exercisable by Vodafone after five years and each subsequent year was decided, with the break right being conditional on Vodafone not being in arrears or material breach of the agreement. Although the Court did prefer Vodafone's valuation approach, it decided to rely on the pre-Code open market comparable put forward by Hanover. As Hanover was able to produce evidence that there was competition between telecoms operators for the site, the rent decided on was £5,750 per year which is a considerable amount more than the £1,386 per year suggested by Vodafone.

Ultimately the terms arrived at will depend on the nature of the site and whether or not there is comparable evidence available to support the suggested rent, but this is a positive step for landowners which shows that the telecoms operators cannot just cite the Code provisions and expect the landowner to accept the terms offered.

If you would like any advice about article, please do not hesitate to get in touch with us.  struttc@gepp.co.uk or call 01245 228126

This is not legal advice; it is intended to provide information of general interest about current legal issues.