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telecoms leases and the new Electronic Communications Code

15 March 2017

Leases from NHS bodies to telecommunications operators (‘telecoms leases’) can be very tempting; they provide an extra source of revenue from an area which would otherwise remain largely empty and unused. The operators also like hospital sites as they often have flat roofs, which are perfect for telecoms leases, and are often the highest structure in the area.

However, trusts and other NHS bodies should be careful when allowing telecoms operators on to their site. As things currently stand, the position is regulated by the Electronic Communications Code (‘the Code’) which is found in Schedule 2 to the Telecommunications Act 1984 (as amended by Schedule 3 to the Communications Act 2003).

The key point to remember with telecoms leases is that once you have let an operator on to your land, you must assume that they are staying on. This is because telecoms operators obtain security of tenure under the Code, and even after the lease or licence arrangement has come to an end, the operator can remain on site and continue to operate. This is in addition to, and separate from, security of tenure afforded by the Landlord and Tenant Act 1954. However, there is no way of contracting out of the security of tenure offered by the Code.

It is very difficult to remove operators without serving a section 20 or 21 notice under the Code. A section 20 notice can be served when you wish to develop the land, and wish to alter or move the equipment. A section 21 notice can be served when there was an agreement, such as a lease in place, and it has come to an end. However the operator has a right to serve a counter-notice under both sections, and if this is done, the landowner will require a court order to remove the equipment.

One additional point to bear in mind is the fact that telecoms leases may permit sharing. If the original tenant begins to share with other code operators, each and every one of those operators will also get security of tenure. It is very important that trusts keep up to date with information about who is on their land, and who is using the telecoms equipment. In practice this might be very difficult, as it is unlikely that new equipment is physically added to any installation on site –purely that sharing of the equipment which is already present is allowed.

If sharing is allowed, one benefit is that the original tenant will often receive a licence fee from the party with whom it is sharing. The landlord may, in such circumstances, ask for a ‘payaway’ – an extra payment over and above the actual rent which is paid from the tenant, which will be a proportion of this sum receiving from the sharing party.

However, the situation is about to become even more complicated in the future. A new Code has been proposed and (if this is implemented as currently proposed) there are a number of key changes to the code situation. Full details of the proposed new code an be found here.

Firstly, under the new proposals, it is made abundantly clear than the Code cannot be ‘contracted out of’ – such that security of tenure must be given.

Secondly, Code rights will be overriding interests – so will continue to bind land which is sold or let, even if the telecoms lease or telecoms rights have not been registered at the land registry. NHS bodies are advised to keep a careful watch over what leases and rights are being granted, to ensure that these are disclosed to any future tenant or purchaser of the relevant site.

Perhaps the two most significant changes though relate to sharing and rent.

Under the new Code, telecoms operators will now have automatic rights to share with other code operators. The intention behind this is to facilitate growth of the telecoms network, but it does lead to problems, as set out above. It will be more difficult for trusts to keep up to date with who is actually sharing on the site. It is also unclear whether there will still be a right for the landowner to receive the payaway relating to sharing parties.

In addition, Code operators will have a right to upgrade the installation. Careful consideration should be given about the location of any installation if this is the case, to ensure that there is no overloading of the capacity. In particular where there a rooftop lease, the capacity of the roof must not be exceeded, and (if a mast is placed on the roof) trusts may also need to think about height restrictions. For example, consideration should be given to any incoming air ambulances which may also use the roof space. Of some comfort is the proposal that upgrades will not be allowed where there is an adverse visual impact or an additional burden.

Lastly, and perhaps most significantly, the new scheme provides that a ‘no scheme’ valuation will be given. A ‘no scheme’ value means that when calculating the rent, the use of the land as a telecoms site is ignored. This effectively means that the land is just valued for its current use. In the case of a roof top telecoms site, this could result in rent being substantially reduced as the value for an empty roof top space is unlikely to be high.

The revised code will not apply to existing telecoms leases. but it is certainly worth bearing the proposals in mind now, as any future renewal of a lease which is entered into now, may well come under the new code provisions.

Trusts and other NHS bodies are recommended to carefully weigh the risks against the benefits in terms of allowing telecoms operators on to their land, and ensuring that any installations are positioned and located so as to cause minimal inconvenience to the NHS body, and the land on which they operate. 

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