The Product Security and Telecommunications Infrastructure Bill proposes reforms to both the Telecoms Code and the Landlord and Tenant Act 1954. As such it is of interest to anyone involved in the renewal of telecoms agreements, whether under the Code or the 1954 Act.
A well-known/notorious problem with the Code in its existing form is the extent to which it precludes operators in situ from seeking to claim new Code rights under paragraph 20. Under that paragraph, operators can only seek new Code rights from the "occupier" of the relevant land. The cases of Compton Beauchamp and Ashloch have established that, an operator in situ being the "occupier", such an operator cannot claim Code rights as against itself so is precluded from using paragraph 20.
Whilst those cases await the outcome of an appeal to the Supreme Court in February 2022, the new bill aims to change the definition of "occupier" in the Code.
The bill provides for the definition of "occupier" to be expanded in cases where land is exclusively occupied by an operator exercising Code rights so as to include:
- Any other person who for the time being exercises powers of management or control over the land
- If there is no such person, every person other than the operator whose interest in the land would be prejudicially affected by the exercise of a Code right in relation to the land.
If enacted, the bill would thus widen the scope for operators to use paragraph 20 to gain fresh code rights, notwithstanding the operators may be already in situ. The problem arising out of Compton Beauchamp and Ashloch would be sidestepped, with operators in situ being able to apply for new code rights against a party (other than the operator) who exercises powers of management and control over the land or has an interest that would be adversely affected by the grant of Code rights.
Renewal rents on telecoms leases protected by the 1954 Act
Currently, an operator who is protected by the 1954 Act cannot seek to renew its agreement under the provisions of part 5 of the Code but must instead use the renewal procedures under the 1954 Act. This means that the renewal rent is to be set according to the open market criteria of section 34 of the 1954 Act, and not on the "no network" assumption of paragraph 24 of the Code.
The result of this is generally felt by the market to be advantageous to site providers/landlords, with the methodology for assessing rents being set out in the 2020 county court case of Vodafone v Hanover Capital.
Under the bill, this will change. Although rents on a 1954 Act renewal will still be assessed under section 34 of the Act, that section will have different provisions where the primary purpose of the current lease is to confer Code rights. In this situation, the renewal rent under the 1954 Act will be assessed on a basis identical to that contained in paragraph 24 of the code.
If enacted, therefore, the bill will eliminate the currently perceived benefit for landlords/site providers to seek to use the 1954 Act on renewals (which has, on occasions, seen landlords counterintuitively arguing that tenants do have 1954 Act rights, something landlords outside the telecoms arena would probably rarely do).
There still appears to be a potential lacuna, as the new provisions only apply where the operator has a "subsisting agreement" as defined in the Code's transactional provisions. That definition seems to require that any "subsisting agreement" must be in writing, so an unwritten periodic tenancy could still potentially be renewed with rents assessed under existing 1954 Act "open market" criteria.