Telecoms: First compensation case under the New Code

United Kingdom

The Upper Tribunal held that consideration payable by an operator for the grant of a rooftop lease for a term of 10 years should be just £1,000 per annum (EE Ltd and Hutchison 3G UK Ltd v The Mayor and Burgesses of the London Borough of Islington ([2019] UKUT 0053 (LC)).

The Upper Tribunal was asked to decide consideration and compensation payable to a landowner pursuant to an agreement to be imposed on the parties. It also decided what form the agreement could take.

  • Terms imposed: The UT ordered an agreement for a term of 10 years, with the remaining terms as proposed by the operator and subsequently varied by agreement between the parties.
  • Consideration: The court held that the appropriate level of consideration payable should be £1,000 per annum, but accepted the operators’ higher submission of £2,551 per annum. The landowner’s contention for £13,500 per annum was rejected.
  • Compensation: The UT rejected all but 2 of the 29 separate heads of compensation sought by the landowner’s expert. Compensation would be payable for the landowner’s reasonable legal and surveying costs and for any damage and loss flowing from the installation of the apparatus on the building.

Background

This was the second visit to the court in this matter. The first UT decision ([2018] UKUT 0361 (LC)) conferred on the operator an interim right to install its apparatus on the landowner’s building. The operator sought conversion of this interim right to a permanent one. While the landowner dropped its opposition to the grant of a permanent right, the court imposed directions for the parties to agree terms by exchange of a draft agreement.

The landowner failed to comply with the directions imposed and therefore the landowner was debarred from objecting to the terms proposed by the operator. The result of this was that the court was only to decide on the level of compensation and consideration to be payable by the operator under the new agreement.

Can the court impose a lease on the landowner?

The landowner raised a preliminary issue as to whether the court could impose an agreement in the form of a lease, or licence.

In making the order, the court considered its jurisdiction to impose an agreement. LBI queried whether the court had the power to impose an agreement in the form of a lease, which the UT held it did. Part 4 (which grants the court power to impose an agreement on the parties) doesn’t specifically refer to an agreement being a lease, but this did not, in the court’s view, prevent the UT from imposing an agreement in the form of a lease. It was relevant that Old Code agreements were usually in the form of a lease and that the Landlord and Tenant Act 1954 had been specifically amended to ensure that tenancies granted for the primary purpose of granting code rights would not be protected by the Act.

Consideration

Paragraph 24 set out the court’s parameters in assessing consideration payable under the New Code. The most important criteria is that consideration is payable on the assumption of “no-network”, the purpose of which is to exclude any element of value attributable to the intention of the operator to use the site as part of its network. The presence in market of operators who might wish to use the site to provide a network must be ignored and the price that would be offered for the site cannot be taken into account when assessing consideration.

On this basis, the operator’s expert placed only nominal value on the rooftop. The landowner sought to compare rents to those paid for car parking spaces, garages and storage units in the vicinity. The court agreed with the operator and placed only a nominal value on the roof space ordering compensation payable by willing parties would be £1,000 per annum.

Compensation

Where a court orders consideration to be payable, it is entitled also to order compensation to either party for any loss or damage that has or will be sustained by that person as a result of the exercise of the code right to which an order relates. This can be by a lump sum, periodical payment, payment on occurrence of certain events or in any form and such time as the court orders.

  1. Compensation does not need to be ordered and payable at the same time. A landowner (or any other party) is entitled to apply to the court for payment of compensation at any time during the term of the agreement.
  2. Compensation for loss and damage includes (a) expenses (including reasonable legal and surveying fees) (b) diminution in value of the land and (c) costs of reinstatement.
  3. Reasonable legal and surveying fees and loss and damage caused by the installation of the apparatus would be recoverable under the expenses heading.
  4. Costs of reinstatement would only be recoverable at the end of the term if the operator failed to comply with the yield up provisions in the agreement.
  5. Diminution in value could not be established in this case, but the court did not rule out claims under this heading in different circumstances or at a later date if evidence supported such an application.

What have we learned?

The “no network” basis upon which consideration is to be assessed has, on this occasion, resulted in a nominal value for this rooftop site.

Compensation for loss and damage suffered by the landowner was limited in these circumstances, but there is scope for future applications to be made during the term should evidence of loss or damage be available. In the short term, the landowner had a lease imposed upon it at a far lower rent than it might have historically achieved under the Old Code. However, there remains scope for additional compensation to be ordered should further loss or damage arise during the term.