ECC and surveyors: Much-needed guidance in a polarised field

Never has an industry seemed so polarised. You either act for an operator or a site provider; you are on one side or the other. It appears that each side has an entrenched position and the give and take that usually occurs in property negotiations is currently missing. The publication by the RICS of its guidance note on the Electronic Communications Code (ECC) – Surveyors Acting in Respect of the Electronic Communications Code (1st ed, 2019) – is therefore timely as more and more people seek to talk about engagement between the parties in this new telecoms world, rather than referring cases to the Upper Tribunal (Lands Chamber).  1. What is an RICS Guidance Note? A guidance note issued by the RICS sets out what the professional body considers good practice for surveyors working in a particular practice area. It is a professional and personal standard for the purposes of the RICS rules of conduct. Surveyors working in the electronic communications sector therefore need to have reference to it. However, unlike an RICS professional statement, it is not a mandatory requirement from which members must not depart. The ECC raises some complex issues, and the advice needed on those issues may be different depending on whether a surveyor routinely acts for operators or site providers. Those issues will also be different as between rural and urban areas. The guidance note reminds surveyors to ensure that they consider whether they have the requisite expertise in this area before taking on instructions. The guidance note also sets out the importance of professional engagement. As set out above, the sector has quickly become polarised around certain positions and it is easy for negotiations to become protracted and for a party to become entrenched in its position.  2. Relationship between the RICS Guidance Note and the Ofcom code of practice As part of the ECC, Ofcom was required to produce a code of practice for those operating under the ECC regime. This code of practice applies to everyone in the sector: landowners, operators and infrastructure providers. The guidance note reiterates that everyone advising in relation to the ECC is expected to comply with Ofcom’s code of practice and those not doing so would not be acting in a way expected by the RICS.     3. A good summary of the ECC The guidance note helpfully runs through how to structure an ECC agreement and what some of the guiding principles should be. This is a very useful overview, summarising the cases to date on this issue. The sections covered are: the term of the agreement; break options; payment, rent reviews and compensation; alterations, upgrades and sharing; assignment; indemnities; access; user clause; costs; redevelopment; removal; dispute resolution; and tribunals. The most detail is contained in the payment, rent reviews and compensation chapter, which is not surprising.  4. The relationship between the Red Book and valuation under the ECC The guidance note reminds all surveyors that, when carrying out a written valuation, the starting point is the Red Book.  The ECC has its own definition of market value at paragraph 24(2). It is defined as: “the amount that, at the date the market value is assessed, a willing buyer would pay a willing seller for the agreement: (a) in a transaction at arm’s length; (b) on the basis that the buyer and seller were acting prudently and with full knowledge of the transaction; and (c) on the basis that the transaction was subject to the other provisions of the agreement imposed by the order under paragraph 20.” As per paragraph 24(3): “The market value must be assessed on the assumptions: (a) the right that the transaction relates to does not relate to the provision or use of an electronic communications network; (b) paragraphs 16 and 17 (assignment, and upgrading and sharing) do not apply to the right or any apparatus to which it could apply; (c) the right in all other respects corresponds to the code right; and (d) there is more than one site which the buyer could use for the purpose for which the buyer seeks the right”.  This is a different definition of market value compared to that contained in the Red Book and requires some very specific assumptions to be made. However, as the guidance note sets out at section 6.3, it is explicitly recognised that the statutory requirement to follow a particular valuation basis must be followed. It is therefore not a departure from the Red Book. However, when doing a written valuation, it must be made clear in the surveyors’ terms of engagement and the valuation report that the ECC requires a different valuation basis.  5. The risk of double counting The ECC separates consideration and compensation. Consideration is a payment representing the value of the right to use the land, on the terms that have been agreed. In comparison, compensation is recompense for loss or damage suffered by the site provider as a consequence of the agreement reached or imposed. The guidance note sets out on more than one occasion that surveyors carrying out valuations need to be alive to this distinction and give careful consideration to all the factors to be taken into account in arriving at a value under each heading to ensure there is no double counting. For example, in EE Ltd and another UK Ltd v Islington London Borough Council [2018] UKUT 361 (LC); [2018] PLSCS 191 an amount of compensation for fair wear and tear to the common parts was rejected as this was already factored into the compensation. The guidance note is available here. Danielle Drummond-Brassington is a partner and head of real estate disputes at CMS