The 2017 Electronic Communications Code, aimed at streamlining the relationship between landlords and telecoms companies and boosting the rollout of 5G, has resulted in a series of unintended consequences.
Contrary to the benefits envisioned by the government, the outcomes have included escalating costs, hostile negotiations, controversial court decisions and a threat to landlords.
Sites are more expensive for all parties
Instead of making sites more accessible, the Code has made them more expensive for operators to acquire. Instead of cost reductions, the changes have led to an upward spiral in expenses for acquiring new sites and negotiating lease renewals for existing ones.
Although the valuation methodology behind the Code reduces rents payable, the associated costs of agreeing on terms have skyrocketed. Landlords are not willing to overlook disagreeable lease terms or poor operator behaviour in exchange for the meagre rents offered. The derisory rents offered by the operators simply do not outweigh the headache for landlords in accommodating telecoms on their property. This has resulted in protracted negotiations and increased agent and legal costs for both sides.
The 2016 Department for Digital, Culture, Media & Sport-commissioned impact assessment estimated that rental payments to landlords would fall by 40%. This estimate was hugely optimistic compared with the reality faced by landlords. When the Code first became law in 2017, offers were swiftly made to landlords devaluing their sites by up to 99%, with sums as low as £50 per annum.
The terms included with these offers include the operator’s right to 24/7 access with no notice, nor supervision while on site, the entirety of a rooftop under its demise, and the ability to install its equipment throughout the roof without regard to health and safety, radio frequency or building structure concerns.
Common sense will tell you that this was not deemed an acceptable proposition by the affected landlords, and the entire industry subsequently ground to a halt. There is little that landlords can do to resist an approach, with the Code granting statutory powers akin to compulsory purchase to the operators to enter and install their equipment on sites as they see fit.
The operators have not been shy about using their new powers, with an abundance of litigation in recent years (hundreds of tribunal cases, as opposed to fewer than 10 under the previous Code).
The new valuation methodology requires surveyors to ignore the presence or use of telecoms when valuing a telecoms site – a complete paradox. It now amounts to a table where sites are valued based on shared characteristics with previous rental values set by the courts. While this has resolved some valuation issues under the Code, the rental value of a rooftop site is still less than 75% of what it was under the previous Code.
The threat of litigation
The Code has led to delays and animosity between landlords and operators owing to improper behaviour by the operators concerning health and safety, cooperation, access demands, upgrade requests, fire safety, site security and site cleanliness.
Whereas, before the introduction of the Code, larger annual rental income glossed over many landlord concerns, landlords are now rightly unwilling to tolerate behaviour that is detrimental and often damaging to their property.
The Code was meant to bring clarity and efficiency to negotiations, but it has instead become the thread by which the threat of legal action hangs over landlords like the sword of Damocles. It is a sword often used, as the massive increase in litigation shows; the operator’s willingness to threaten legal action at every turn has created an environment of apprehension and mistrust throughout the sector.
Operators can serve notices on landlords at will to change any part of an existing agreement or access a landlord’s property for a new site. There is no way for landlords to refuse an operator’s request, and they are forced to grant permission to operators to access and assess the suitability of their property through an intrusive survey called a multi-skilled visit. Any landlord who refuses or does not respond can have the MSV enforced by the tribunal.
If a site is deemed suitable, landlords cannot refuse to enter negotiations for a lease on their property for a new telecoms installation. A landlord may only remove an operator by proving a settled intention to redevelop the site, which will be bitterly fought by the operator before the tribunal.
Such endeavours can be too expensive for smaller landlords. Given the operators’ substantial financial power, the threat of extortionate legal costs often leads landlords to acquiesce to their demands.
Living with telecoms installations
Once the operator’s equipment is installed, landlords face a constant battle to ensure their property is not damaged, is maintained safely and is kept in adequate condition. The hassle and burden of hosting telecoms installations on property have turned them into a perpetual liability.
As we assess the aftermath of the Code seven years on, the intended benefits predicted by the DCMS’s impact assessment have been overshadowed by unintended consequences. Costs have increased, negotiations have stalled and the ever-looming threat of expensive litigation hangs over landlords. This has created a hostile environment far from the initial vision.
Will Jackson MRICS is a senior surveyor at Hub Telecoms Consultancy
