The terms easements, wayleaves and leases are often used interchangeably by landowners and land agents when dealing with the installation of utilities along a linear route (such as pipelines, electricity cables or water or gas pipes). However, each category has very specific characteristics which can be helpful in terms of obtaining the appropriate rights in the relevant circumstances but which include traps for both parties – the landowner can find its land subject to third-party rights for longer than anticipated (in some cases indefinitely) and the developer/operator can find itself a beneficiary of rights which it cannot pass on to a successor, or where it is questionable whether the right in question was, in fact, validly granted.
Given the wide scope of these legal concepts, this article is only designed as a basic high-level summary of the main points to consider.
What questions need to be answered at the outset?
The initial questions are:
- what is the asset for which the rights are required?
- what sort of body needs the right?
- for how long are the rights needed?
- should the rights benefit successors?
- are compulsory rights available?
Wayleaves
So, what is a wayleave and in what circumstances might one see or want to use one? Wayleaves are a classic example where it is vital to understand the nature of the asset and the statutory regime pursuant to which the wayleave will be granted. For example, a telecoms wayleave can have a different impact to a water wayleave (albeit ostensibly they are both simply rights to lay and retain a subterranean linear asset).
Wayleave characteristics
- Format: There is no deed requirement and true wayleaves (as opposed to wayleaves which are, in actual fact, a lease or easement) are not compulsorily registrable. This lack of formality can mean that landowners are more willing to enter into an agreement and the arrangements can be completed more quickly. Therefore, from a developer/operator’s perspective, this has obvious cost and timing benefits.
- Not proprietary: It is important to realise that a wayleave does not create an interest in land. It is essentially a contractual licence arrangement between two parties usually to install and retain equipment.
- Duration: A wayleave is not permanent but (subject to “Code rights” (see below) where relevant) may be limited in time and determinable on notice. An annual fee is often payable.
- Does not bind successors: Wayleaves do not typically bind or benefit successors, so depending on the nature of the asset, this method of documenting rights may not offer the necessary longevity. A gas or fuel line is a good example of an asset not best suited to a wayleave, as the majority of the major petroleum product lines in this country have been in situ since the 1960s or before and can be repaired and replaced in situ. However, wayleaves which are Code-protected will, as a result, be more permanent and survive changes in the ownership of land over which the rights are granted.
- Exclusive possession: A wayleave typically grants rights to lay and retain infrastructure. It does not and cannot grant exclusive possession. What this means in practice is that where the asset is high risk, high value or both, the developer/operator is unlikely to want to risk the possibility of third parties interfering with the land immediately around or above the subterranean asset due to health and safety and integrity of supply issues. Typically wayleaves are used in the case of water and electricity where the asset is not laid at depth, any damage is unlikely to cause contamination and could typically be quickly remedied.
- Dominant land: In contrast to easements, the developer/operator does not need to own the dominant land (being the land with the benefit of the right). This is particularly useful to entities such as water or electricity companies where the beneficiary of the rights is unlikely to own any of the land which the utility is benefitting.
- Compulsion: Typically, wayleaves are agreed by private treaty but there is a category of wayleave – necessary or statutory wayleave – where there will be automatic rights to impose a wayleave where the landowner is reluctant to do so.
(a) Compulsion – electricity
Paragraph 6 of Schedule 4 of the Electricity Act 1989 sets out the requirements in England and Wales for obtaining a “necessary wayleave” (Northern Ireland has its own similar regime).
(b) Compulsion – telecoms
The law relating to telecommunications changed in 2017 with the Electronic Communications Code (the Code) introduced by the Digital Economy Act 2017 (the 2017 Act). The 2017 Act inserts the Code as Schedule 3A into the Communications Act 2003 and repeals the Electronic Communications Code contained in the Telecommunications Act 1984.
The Code gives telecoms operators so-called “Code rights”, which include the right to install, maintain and keep the equipment they use in the provision of a telecoms network on, in or over private land.
Code rights can still be granted voluntarily by written agreement between the operator and landowner (which includes occupiers). However, if an agreement cannot be reached, landowners can be compelled within certain parameters to grant such rights as are deemed necessary by a court order. The power of the court to impose an agreement is set out in Part 4 of the Code.
Regardless of how an operator obtains Code rights, they can only be terminated in accordance with the Code, even if the underlying contractual agreement which granted them has come to an end. Termination provisions are covered in Part 5 of the Code.
Under the new Code, operators have an automatic right to share their sites with other licensed operators and to assign their rights (neither of which require the consent of the landowner). Agreements which attempt to place restrictions on such rights will be void. However, a landowner can require an assigning operator to enter into a guarantee agreement.
Equally, landowners have lost some of the control they enjoyed under the previous Code, as operators now have an automatic right to upgrade equipment without the consent of the landowner, provided there is no more than a minimal adverse visual impact and no additional burden on the landowner.
The new Code and the wider-ranging rights available to operators reflect the government’s attempt to provide enhanced and quicker connectivity, but the result is that the rights of the landowners to deal with the affected land have become more limited.
Easements
Easements are also often viewed by some as a relatively quick and easy way to obtain necessary land rights for a project, as they are rights over land as opposed to a demise of land and so can be seen by landowners as a softer option to a full-blown lease. Another consideration is that in some cases, mortgagees may be (whether rightly or wrongly) happier to grant consent to an easement than a lease. Easements may be used for larger, more permanent infrastructure projects.
Easement characteristics
- Dominant/servient land: Crucially, an easement must satisfy the test whereby the dominant land (being the land benefiting from the right) must enjoy the benefit of the easement and the right must be appurtenant to that land interest. In addition, the servient land (the land subject to the easement) must accommodate the easement. Both land interests must be clearly identifiable.
What this means in practice is that the entity seeking to benefit from the rights either needs to own the land being benefited (unlikely in the case of, for example, a water company) or be able to rely on an (as yet untested) convenient legal fiction whereby statutory undertakers annex the benefit of the easements granted to their statutory undertaking, thereby neatly sidestepping the “dominant land” requirement. However, developer/operators who do not enjoy statutory undertaking status would be unwise to rely on this method to obtain their rights (unless they own the dominant land) as they have no undertaking for annexation purposes.
- Proprietary: An easement is a proprietary right and is capable of benefiting and binding successors. As such, it is a suitable mechanism for long-life assets. A legal easement must be granted in fee simple or for a term of years certain.
- Registrable: A legal easement must be made by deed and is registerable, meaning both the benefit and the burden of an easement will appear on the relevant registered titles (which is a benefit from both a health and safety perspective and ensuring the right is not challenged by third-party purchasers).
- Compulsion: Different utilities have different regimes and where one is dealing with a fuel pipeline for instance, a developer/operator can apply for a compulsory rights order under the Pipe-Lines Act 1962, compelling the landowner to grant the necessary rights to install and maintain. This is not to be confused with the compulsory powers available under Schedule 3 and 4 of the Gas Act 1986, which give the promoter various compulsory purchase powers.
Leases
Arguably, leases take the longest time to negotiate, but in certain cases are the only means to give both sides of a transaction certainty as to what rights are being granted and how long they will subsist.
Lease characteristics
- Estate in land: leases are proprietary and grant an interest in land.
- The Landlord and Tenant Act 1954 (the 1954 Act) (security of tenure): statutory protections may apply to tenancies where the tenant is a business and the lease is not contracted out of the protection of the 1954 Act, which means such tenants may be automatically entitled to a renewal lease on substantially similar terms to the original.
However, please note the interaction of the 1954 Act and the Code. Under Part 5 of the Code, an operator cannot enjoy the protection of both the Code and the 1954 Act.
If the primary purpose of a lease granted after the Code came into force is to grant Code rights, then that lease will be a Code agreement, and the 1954 Act provisions relating to security of tenure will not apply.
Conversely, a business lease governed by the 1954 Act (whether or not it has contracted out of the protection of the Act) whose primary purpose is not the grant of Code rights is not a Code agreement.
As there is no definition of “primary purpose” in the Code, it is advised that parties include a statement as to whether or not the primary purpose of the occupation is to confer Code rights.
- Successors: a lease will benefit and bind successors and is (term dependent) registrable.
- Exclusive possession: importantly for developers/operators, a lease offers the security of a demise. In the case of fuel pipelines, the tenant is typically granted a 999-year lease of a subterranean box with surface down easements for matters such as access and working. This makes it ideal for high-risk, high-value assets where the company is not a statutory operator that can go down the easement route.
Final word
Wayleaves may be appropriate where there is no dominant land and permanent rights are not needed.
Landowners will, however, be necessarily wary about agreeing any telecoms wayleaves, given the wider-ranging rights granted to operators and the statutory restrictions on terminating such rights, regardless of the express terms agreed between the parties.
Easements can be a useful tool to obtain permanent land rights, as long as the “appurtenance” test is satisfied.
For non-statutory operators who either cannot exercise compulsory rights or do not (for reasons such as cost or reputation) choose to exercise them, the traditional lease can often be the best vehicle to give the developer/operator the security of tenure and freedom from interference needed for permanent high value infrastructure.
In short, when documenting arrangements for infrastructure, there is a place for wayleaves, legal easements and leases. It is therefore important always to consider the initial questions set out above and to decide the best arrangement in the circumstances for the asset in question.
Jayne Elkins is a partner in the real estate/transactional team and Emily Tetley-Jones is a director in the real estate/energy and infrastructure team at Fieldfisher LLP
