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Rooftop rows: What does an imposed Code agreement mean for site providers and operators?

Lillee Reid-Hunt and Christos Paphiti consider a recent Upper Tribunal decision that provides useful guidance on what site providers and telecoms operators can expect from the terms of an imposed Code agreement, especially in relation to upgrading and sharing of equipment and ballpark consideration and compensation figures.

Upper Tribunal (‘UT’) imposed agreement

Telecommunications operators will seek to acquire rights under Schedule 3A of the Communications Act 2003 (the ‘Code’) to install and maintain apparatus on land through negotiation of a written agreement with a site provider, being the person or entity in occupation of the land (usually the landowner). Failing this, subject to certain conditions the operator can apply to the UT for an order imposing an agreement under paragraph 20 of the Code.

The UT can make an order if the conditions of paragraph 21 of the Code are satisfied, as follows:

  1. the prejudice caused to the site provider can be adequately compensated by money; and
  2. the public benefit likely to result from the order outweighs the prejudice to the site provider. In considering this limb, the UT must have regard to the public interest in having a choice of high-quality electronic communications services.

Cornerstone Telecommunications Infrastructure Ltd v London & Quadrant Housing Trust [2020] UKUT 282 (LC)

Cornerstone Telecommunications Infrastructure Limited (‘CTIL’) sought the right to install electronic communications apparatus on the rooftop of a mixed-use development in Peckham following determination of an agreement under which the apparatus was housed on another site. The Peckham development was owned by London & Quadrant Housing Trust (‘Quadrant’), a registered social housing provider, and around two thirds of the rooftop comprised solar panels.

Following failed negotiations between the parties, CTIL successfully applied to the UT for the imposition of interim Code rights in April 2020 and then for the imposition of a final Code agreement. The question on whether the paragraph 21 test was met was settled early in the claim and the parties had agreed upon various terms that should be included in a final Code agreement. The UT was therefore asked to consider what the terms of a final Code agreement should comprise in relation to:

  1. a cap on the equipment that could be installed by CTIL;
  2. upgrading and sharing – this was particularly relevant for CTIL’s business, which operates by providing apparatus for the purposes of the networks operated by its two shareholders, Telefonica UK Ltd and Vodafone Ltd; and
  3. compensation and consideration – this was particularly relevant for Quadrant given the existence of the solar panels on the rooftop and the potential effect of the apparatus on its building services and costs (safety, maintenance, insurance, use of common parts etc.).

The Decision

Equipment cap

Quadrant sought to limit the equipment that CTIL could install under the terms of the agreement to an exhaustive list, but the UT held that a cap would be inappropriate because Quadrant’s interest was already sufficiently protected. It held that the proposed Code agreement contained terms preventing CTIL from overloading the building and required it to take all reasonable steps to ensure its apparatus did not pose any health and safety issues. Further, CTIL would be limited to installations within the defined site boundaries and any additional equipment would be subject to planning constraints.

Upgrading and sharing

Paragraph 17 of the Code enables an operator to upgrade and share apparatus, provided that the exercise of such rights does not have a more than minimal adverse impact on appearance of the apparatus and does not impose any additional burden on the site provider.

CTIL sought unlimited upgrade and sharing rights. Quadrant argued that any such rights granted should be limited to the conditions in paragraph 17 of the Code to counteract the burden that would be caused (especially in relation to health and safety) in the context of a mixed-use development with alternative infrastructure occupying much of the rooftop.

The UT accepted CTIL’s argument that paragraph 17 does not comprehensively contain the upgrade rights that may be required by an operator, and an operator may seek express agreement from a site provider for a wider range of rights. The UT applied the ‘least possible loss and damage principle’ contained in paragraph 25 of the Code and held that Quadrant’s concerns could be addressed by limiting CTIL’s sharing rights to two operators without any paragraph 17 conditions, with further sharing to be permitted subject to paragraph 17 conditions. The UT decided that restrictions on upgrade would be in inappropriate given the expected improvements to technology during the ten-year term of the agreement.

The UT highlighted that the fast pace of technological change in the telecommunications industry means that operators must future proof sites because the rights granted under a Code agreement cannot be expanded during the term of such agreement without further negotiation and compensation. The UT held that paragraph 17 is a ‘statutory irreducible minimum’ so it operates as a floor, not a ceiling, and the minimum rights under paragraph 17 were not appropriate in the context of a ten-year Code agreement with an operator whose business is to share apparatus.

Consideration and compensation

The decision in this case provides the first full review of valuation under Code agreements since EE Ltd and another v LB Islington [2019] UKUT 0053 (LC).

The UT set consideration for the rooftop site at £5,000 per annum (considerably less than the consideration in the sum of around £16,000 sought by Quadrant). The figure took into account:

  • a nominal site value per annum (approx. £50);
  • the benefit to CTIL of the provision of Quadrant’s building services – insurance and maintenance (approx. £1,500);
  • an allowance for additional burdens to Quadrant for managing CTIL’s access to the common parts and the rooftop (including the solar panels) (approx. £1,000); and
  • an allowance reflecting anticipated costs to Quadrant for CTIL’s sharing rights to two additional operators and unlimited upgrade rights.

The UT capped compensation payable to Quadrant for its professional fees in connection with negotiation of the Code agreement at around £3,000.

The UT reiterated that pre-Code transactions are not relevant to the assessment of consideration under paragraph 24 of the Code, and further, while each determination will be fact-specific the UT would not expect that the market value of a rooftop site with extensive rights would be more than £5,000 per annum, regardless of its location.

Remark

The UT’s comment on the market value of rooftop sites for telecommunications apparatus helps to manage the expectations of parties negotiating new Code agreements, and presents telecoms surveyors with a ballpark figure from which to apply the Code’s valuation methodology across various sites. The decision also guides parties to take a ‘holistic’ approach in considering what protections are available under the Code, the planning regime and the terms of the agreement itself to address concerns.

Parties may also approach negotiations with more of an eagerness to settle Code agreements between them without seeking the imposition of an agreement by the UT. Not only could the UT impose less favourable terms, but the costs associated with the court process will not necessarily be borne by the successful party – especially where a Code agreement is imposed and neither party can necessarily be deemed the ‘winner’. In this case, each party was ordered to pay its own costs (CTIL’s were in the sum of around £300,000 and Quadrant’s in the sum of around £150,000).

Lillee Reid-Hunt is an Associate and Christos Paphiti is a Trainee Solicitor at Sharpe Pritchard.

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