Telecoms: Important New Code case relating to residential rooftop

Considered market evidence for the first time – the Tribunal provides further guidance on levels of consideration for rooftop sites of residential blocks

In CTIL -v- L&Q [2020] the Tribunal was asked to determine the terms (including the consideration) to impose a new telecoms code agreement for a rooftop site of a residential block in London.

There were only a few terms remaining in dispute:

Lift and Shift – who should pay for the temporary shifting of equipment to enable landlords to carry out repairs?

The Operator conceded on the last day of the trial that they should pay for all lift and shifts throughout the term. Martin Rodger QC commented during the trial that “the notion that landowners should pay for lift and shifts is ludicrous… [the parties] are out of their minds if they thought the landowner should pay”.

Should there be a presumption in favour of the Operator’s terms?

The Tribunal agreed with landowner that there was no presumption in favour of the Operator’s preferred terms and no onus on the site provider to justify a departure from the operators standard terms. The Tribunal has a wide discretion to impose terms as it thinks appropriate recognising that it is directed to incorporate terms intended to minimise loss and damage to the landowner.

Should there be a list of equipment annexed to the new agreement? Should the operator have to specify the equipment it wants to install?

No. The Tribunal suggested that once the equipment has been installed the parties should agree a photographic record of the equipment that has been installed. This will then provide a reliable baseline from which to apply the paragraph 17 condition. Para 17 provides that the operator has no right to effect an upgrade which has more than minimal “adverse impact” on the appearance of the equipment or results in any additional burden on the landowner. The Tribunal considered the idea that an operator would install unlimited equipment was “fanciful”. The fact that the agreement contained terms prohibiting the operator from overloading the building, to ensure the building was not unsafe and that the operator was prevented from installing equipment practically and legally outside of the area edged red on the plan meant that the potential for significant additional apparatus was limited and those terms were sufficient to protect the landowner’s interests.

Upgrading and sharing

The Tribunal found that the Para 17 rights to upgrade and share were a minimum standard that would apply in the absence of other provision, but that the Tribunal could order less restrictive terms if it was appropriate to do so; and, crucially, it was for the operator to justify less restrictive rights.

The Tribunal considered it appropriate to permit upgrading without limit, given uncertainty about how the technology will develop, the length of the term, and the uncertainty about what would and would not count as an upgrade.

It also considered that para 17 was too restrictive given CTIL’s business as an infrastructure provider providing passive infrastructure for sharing with others. But it did not consider that unrestricted sharing was compatible with ensuring the least possible loss and damage to landowners. The number of persons entitled to share the infrastructure was curtailed to two (giving notice of any assignment or sharing within 21 days not two months as proposed by the operator). The Tribunal noted that the purpose of CTIL’s application to impose an agreement on L&Q, was to enable it to host apparatus belonging to its two shareholders, Vodafone and Telefonica, although it did not limit sharing to only those two parties.

The Tribunal considered that unrestricted sharing apparatus on the roof of a large residential building would result in additional traffic through the common parts “the more checks L&Q will reasonably wish to make on the suitability of those working on the roof and the more burdensome it will become to L&Q to comply with its own building safety obligations”.

Consideration

The Tribunal started its analysis with the six stages proposed in Vodafone v Hanover Capital (a case dealing with valuation in a 1954 Act renewal):

1. To assess the alternative use value of the site which will be the rental value of the current use or the most valuable no-network use.
2. If additional benefits would be conferred an allowance should be made to reflect it ie manned security gate/concierge.
3. If the letting would have a greater adverse effect on the willing lessor than the alternative use, this should also be reflected by an adjustment;
4. Consideration has to be given to the fees payable by the hypothetical landlord for negotiating the rent. Evidence demonstrated that operators “routinely” make a contribution on new code lettings and renewals;
5. Operators usually make a contribution towards legal fees for conveyancing.
6. An additional amount an operator will pay by way of inducement to secure the letting.

Consistently with the comments of the Court in that case, it held that the first three of these stages are likely to be the necessary components of most valuations by the Tribunal under Para 24 of the Code.

The Tribunal considered that the consideration of this London rooftop site should be an annual payment of £5,000 for a ten year agreement where the freeholder insured and kept the building in repair, allowed for access (the operator agreed to give L&Q prior notice of visits). The Tribunal recognised that the use of a rooftop through common parts (which other occupants have rights to use and which will be regularly visited by contactors) is likely to involve the landowner in expense which would otherwise be avoided which should be taken into account in any hypothetical negotiation. The consideration ordered included an allowance for building maintenance and insurance of £1,500, an allowance of £1,000 for managing access and an allowance for the anticipated costs for upgrading and sharing with two other operators.

The Tribunal reviewed market evidence and decided that deals negotiated before the commencement of the new code could not be taken as a reliable guide to values. Neither is evidence of existing sites. However, evidence of new lettings negotiated after the commencement of the new Code provided “the most helpful guide as to what the parties to a consensual agreement for a letting” would agree. The Tribunal made it clear that operators should share information on other transactions and experts should request information they reasonably require from their counterparts to enable them to provide their evidence. In this case the Tribunal ordered disclosure of a comparable. The Tribunal made it clear that the relevance of a comparable was not a matter to be determined by the operator or its legal representatives but was a matter for the Tribunal.

Finally, the Tribunal considered that willing parties negotiating a ten-year arrangement would be more likely to agree an annual payment rather than a “one off” payment.

Compensation

The Tribunal recognised that in a residential building it is reasonable for a representative to be present when access to the roof is undertaken not least to keep a careful record of work done and the identity of those undertaking the work. The agreement requires the operator to provide copies of permissions and consents together with plans, risk assessments and structural calculations and the Tribunal recognised that keeping this material will incur costs to the landowner. Future works including upgrading or installing new apparatus will result in further costs that can be recovered from the operator at a later date.

It should be remembered that the Tribunal has no power to order the payment of compensation when a code agreement is entered into consensually. The Tribunal made it clear that L&Q are entitled to claim compensation for the costs associated with complying with the additional requirements of the new Building Safety legislation, any loss arising out of the use of a generator, any RF training or survey costs and any costs of dealing with the installation under the interim agreement. The situation is different if a code agreement is entered into consensually – “The parties to a consensual Code agreement must therefore make contractual provision for compensation or must reflect the risk of loss and damage caused by the exercise of code rights in the consideration they agree”. The Tribunal acknowledged that figures that the Tribunal’s impose are unlikely to provide a complete guide for parties negotiating terms for whom the only relevant statutory right to compensation will be for injurious affection to neighbouring land which is available whether a code agreement is agreed or imposed by the Tribunal.

The sum awarded was considerably higher than the sum of £1,000 awarded in the Islington case and whilst each case will be determined on their own facts, the evidence gave the Tribunal “no reason to expect that the market value of a site providers agreement to confer code rights over a roof top site on any different residential building will be much more or less than the sum of £5,000 we have determined…the evidence does not suggest that there is much difference between the value of a site on a residential building in Inner London or in Sheffield and we would be surprised if values in other parts of the country were not in the same narrow bracket”.

Kary Withers of Clarke Willmott acted for L&Q.