Renewing Telecoms Mast Leases – Fraught with Uncertainty

Could your business stomach costs of £105,000?

With a large number of Telecoms leases now reaching the end of their original terms, landowners are being forced to accept huge reductions in the annual rents being achieved for these sites throughout the UK. With rents in some cases being reduced by 90%, what can be done and what is likely to happen in future? Set out below are brief details of the difficulties faced in relation to rents, when renewing telecoms leases and an overview of important Court decisions.

The Electronic Communications Code, as part of the Digital Economy Act 2017, came into force on the 28th of December 2017 and replaced the previous version of ‘the Code’ from the Telecommunications Act 1984.

Historically, most telecoms mast sites would last for a period of between 10 & 20 years and would include a mechanism to increase the rent (usually on an RPI basis) every 3 years. As such, landowners have enjoyed continually increasing rental income from small, sterilised sites, which require little in the way of access or maintenance.

Over time, and with the huge increase in mobile phone use, the government realised that signal coverage, and availability of high-speed data was being hampered (allegedly) by a lack of telecoms mast sites due to over-inflated rents being paid and a reluctance by operators to invest in their fixed infrastructure. The new Code was intended to open up the market to operators by encouraging new masts to be built (with rents offered as low as £250), using statutory powers, allowing signal black spots to be removed and increase the bandwidth for the rollout of 5G and future technologies.

Whilst this all sounds sensible in theory, in practice, the 2017 Code has caused huge issues to landowners and operators as Court cases have been brought and legal decisions reached. One of the early cases, Cornerstone Telecommunications Infrastructure Ltd v Ashloch Ltd (2019), confirmed the legal principle that a lease renewal should be determined under the Landlord & Tenant Act 1954 (assuming that the L&T Act had not been contracted out of) and not under the new Code. The following case of Vodafone Ltd v Hanover Capital Limited (2020) then confirmed that the Courts would take a view that rents calculated under the L&T Act 1954 could use old Code valuations (going against the new Code principle of a ‘no network’ method of rental valuation) and determined that the annual rent should be £5,750 per annum over a ten-year term.

Although this sounds favourable, be warned, this is not the final conclusion of ongoing legal proceedings and a blow was struck when the Upper Tribunal released their decision at the end of 2020 on the case of On Tower UK Ltd v J H & F W Green Ltd (2020). The Upper Tribunal decided that the annual rent for this case (a rural site in West Sussex) should be £1,200 and that a percentage of costs would be awarded (March 2021) to cover the site operators’ total costs of £264,557.47. After an original demand that the site owner pay 75% towards the operators legal and professional costs, the Tribunal restricted this to 40%, meaning the site provider was ordered to pay over £105,000.

It must be noted that every site is different and that legal cases continue to work their way through the legal system. Whilst recent Court awards appear to be more in favour of operators’, there is still scope to negotiate sensible rents on reasonable terms without suffering crippling costs, particularly if Agents are engaged early in the process. The cases outlined above are described in the briefest possible terms and should not be relied upon without professional advice.

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