Following on from a previous article regarding the 2017 introduction of the Electronic Communications Code (“the Code”), here’s an update on recent changes in attitudes from some telecoms companies.
When the Code was introduced, it gave telecoms providers significantly increased power over landowners, mainly by offering security of tenure. Some telecoms operators took this as an opportunity to try and ransom landowners with mast sites into nominal rents, instead of the then much higher rent prices being paid. Landowners, supported by their solicitors and agents, resisted this by not offering to renew the tenancy at this much reduced rent and instead optioned to continue on a year-to-year basis on the current tenancy – thereby maintaining higher rents until the issue tested in the Courts.
So, what has changed?
More recently, telecoms operators have been willing to offer a larger consideration or incentive payment to sweeten the deal and allow the renewal of tenancy to a new lease operated under the code. This effectively increases the rent by supplemental payments. For the telecoms company it is not classed as rent, so is not used in future market rent calculations. This has been seen as an acceptable compromise by agents: the landowner gets the inflated payment more similar to current rent rates, but from the tenant’s point of view the actual rent (which can be used in comparisons of Market Rent) is set at the lower value, so does not influence future rent reviews.
Impact on valuations
In a positive step for landowners, in the recent case of EE Ltd and Hutchinson 3G UK Ltd v R Morriss, DH Tayler and Pippingford Estate Co, the Court advised that, as these considerations/top up payments (often protected behind confidentiality clauses) are offered as part of the lease, they form part of the rent discussion and should be disclosable evidence. Under the Landlord and Tenant Act 1954 only the actual rental payment can be taken into account. This should result in higher rental payments going forward.
In the above case, this resulted in the rental suggested by the tenant of £300 (later revised by the tenant to £950 and then £1200 per annum), being increased to £3500 per annum as a result of the consideration being added into the mix by the Court.
Obviously as solicitors we cannot guide you on valuations, but please do speak to your agents and your solicitors before agreeing renewal terms as following this case, there may be much more favourable terms available.
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