Telecoms case update on valuation: On Tower UK Ltd v JH and FW Green Limited [2020] UKUT 0348 (LC)


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On 15 December 2020, the Upper Tribunal handed down judgment on the valuation principles under the Electronic Communications Code in relation to a rural greenfield site, as well as dealing with equipment rights, upgrading and sharing. This decision marks the first time the Upper Tribunal has had to determine consideration and compensation for a lease renewal under Part 5 of the Code.

Background

The reference was brought by On Tower UK Ltd, a wholesale infrastructure provider, who has a telecommunications mast and other equipment installed on a site located on the Dale Park Estate, within a national park, pursuant to a lease granted in 1999. The lease was contracted out of the security of tenure provisions of the Landlord and Tenant Act 1954 and had expired in March 2019. The claimant sought a new lease under the Code, and although the site provider did not object to the grant of a new lease, several issues remained in dispute between the parties.

The issues and Upper Tribunal's determination

The issues in dispute which fell to be determined by the Upper Tribunal in relation to the new lease included:

1. Installation and upgrading of apparatus

The claimant sought:

  • An unlimited right to install and keep any electronic communications apparatus on site, but the site provider wanted the agreement to limit the equipment by reference to a specified list
  • An unqualified right to upgrade its equipment, whereas the site provider wanted a right to upgrade limited by the conditions set out in paragraphs 17(2) and (3) of the Code. These provisions provide an operator with a right to upgrade (or share) its apparatus provided any changes to the apparatus have no adverse impact on its appearance, or no more than a minimal adverse impact, and no additional burden is imposed on the other party to the agreement. An additional burden includes anything that adversely affects the other party's enjoyment of the and or causes them loss, damage or expense

The Upper Tribunal dealt with these together, both of which are Code rights, and held there should be no limit on the claimant's rights to install and upgrade apparatus on the site. Although the Upper Tribunal appreciated the site provider's concerns, namely that an unlimited right to install and upgrade could lead to increased traffic, create noise disturbances, pose a security threat and act as a visual intrusion, it held that these worries seemed to be exaggerated and that the protection afforded to the site provider in the agreement, preventing the claimant causing a nuisance or causing the site provider loss or injury, was enough to ensure that future disturbances could be remedied.  The Upper Tribunal also commented that the site provider would benefit from the planning controls in the national park which would also act as a safeguard against its concerns.

2. Sharing the apparatus

The claimant sought a right to share its equipment with mobile network operators, without qualification, on the basis that as a provider of infrastructure its business depends upon the ability to freely share its apparatus.  The site provider wished to limit this right to share by reference to the conditions of paragraphs 17(2) and (3) of the Code.

The Upper Tribunal held an unrestricted right to share the site would be included in the agreement, and commented that without the ability to share, the claimant would be out of business and unable to fulfil its statutory purpose. Whilst the Upper Tribunal acknowledged that limiting the number of operators or allowing sharing to specific operators was worthwhile in some cases (such as in the recent decision of CTIL v  London and Quadrant Housing Trust), the circumstances of this case were different and restricting the right to share would be very onerous for the claimant. There were also safeguards afforded by the agreement and the availability of compensation.

3. Consideration and compensation

The Upper Tribunal approached the question of consideration by using the three-stage approach adopted in CTIL v London and Quadrant Housing Trust as follows:

  • Firstly, to assess the alterative use value of the site (comprising the rental value of its current use or of the most valuable non-network use)
  • Secondly, if additional benefits would be conferred on the tenant by the letting, an allowance should be made to reflect them
  • Thirdly, if the letting would have a greater adverse effect on the willing landlord than the alternative use on which the existing use value was based, this should also be reflected by an adjustment

It was held that the claimant should pay consideration of £1,200 per annum, comprising firstly £100 for the alternative use value of the site (which was agreed between the experts), secondly £600 to reflect the additional benefits conferred on the claimant and thirdly £500 as compensation for burdens on the site provider.  In reaching this figure, the Upper Tribunal commented on the special attributes of this site, being a rural site with residential dwellings in close proximity, and acknowledged that in the absence of these special attributes the value of the burdens would be lower, leading to a more appropriate overall figure of £750 per annum.

The Upper Tribunal further awarded £7,957.90 plus VAT as compensation for legal costs.

Comment

The three-stage approach employed in this reference provides both operators and site providers alike with a useful analysis of the process which the Upper Tribunal might readily follow in a future assessment of consideration. The Upper Tribunal has also made clear the approach to be taken in respect of valuation of rural greenfield sites in particular and that absent of particular special attributes, such as a site being within close proximity of residential dwellings, a figure of £750 per annum would be appropriate rather than the higher £1,200 per annum determined in this reference.

This decision may also prove to be a useful guide for parties in relation to the Upper Tribunal's approach on terms relating to equipment rights, upgrading and sharing, in particular between landowners and infrastructure providers of the type in this reference. This may be a welcome sign for operators seeking to facilitate the rollout of electronic communications apparatus, but could well give rise to some level of concern for particular types of landowner.

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