How much is that pylon on the rooftop?

A decision on the Electronic Communications Code reveals what consideration should be payable for sites, writes Guy Fetherstonhaugh QC. Over the years, those of us who walk the pavements of our towns and cities have become used to keeping a weather eye open for oblivious mad communicators coming the other way, tapping text into their phones, or jabbering into a mouthpiece. If the wavebands used by electronic communications formed part of the visible portion of the electromagnetic spectrum, we would spend our lives in a blizzard of light. The originating equipment for all this electronic communication – masts, antennae, equipment cabins and cables – must be accommodated somewhere. Fortunately, masts are insensible to their immediate surroundings, provided sight lines are adequate, and so it is that sites which are otherwise unable to be turned to profitable account have over the past few decades sprouted masts and other electronic paraphernalia. Think corners of fields, trees and rooftops. In the days of the old Telecommunications Code, which governed such matters between 1984 and (in amended form from 2003) the dying days of 2017, such bits of land could earn the landowners tidy sums (albeit nothing compared with the costs of procuring removal of the kit in the event that they needed their land for another purpose). But all that was set to change with the Electronic Communications Code 2017 (the New Code). Valuation under the New Code The government’s intention was that the basis on which rights would be valued would change from the previous true market value approach, to a new “no scheme” approach: that is to say, one that requires it to be assumed that the rights to be granted do not relate to the provision or use of an electronic communications network, and that the landowner providing the site has no monopoly of suitable sites. In Cornerstone Telecommunications Infrastructure Ltd v University of London [2018] UKUT 356 (LC); [2018] PLSCS 188, the deputy president of the Upper Tribunal (Lands Chamber) (the UT) noted the view expressed by some commentators that “because of these assumptions, the consideration payable under the Code may be quite modest”. The question whether the commentary was accurate was not for decision in that case – but it has now been decided, only a few weeks later, in EE Ltd and another v Islington London Borough Council [2019] UKUT 53 (LC). The battle lines EE concerned a typical rooftop site, for which the landowner wanted an annual rent of £13,250, and for which the operators were prepared to offer a nominal rent of £1 as consideration under paragraph 24 of the New Code, thus sharply illustrating the gulf in market practice under the Old and New Codes. In a judgment that demonstrates the UT’s business-like approach to New Code claims, and in particular shows its determination to produce decisions within six months, the deputy chamber president, sitting with Mr AJ Trott FRICS, ruled that the paragraph 24 valuation of the consideration that should be payable for the grant of the Code right was an ordinary open market valuation. However, the principal assumption to be made in carrying out that valuation – namely that “the right that the transaction relates to does not relate to the provision or use of an electronic communications network” (what the UT called the “no-network” assumption) – had the effect of excluding from the assessment of consideration any element of value attributable to the intention of the operator to use the site as part of its network. This assumption gave effect to the policy expressed in the ministerial statement preceding the introduction of the New Code that the fair return to the site provider “should not, as a matter of principle, include a share of the economic value created by very high public demand for services that the operator provides”. As the UT remarked: “The presence in the market of operators who might wish to use the site to provide a network must therefore be ignored, and the price which such operators would in practice offer for the site must not be taken into account in assessing consideration.” In words which will be of even application to many other land valuation scenarios where there is little or no competition, the UT rejected the proposition that a requirement to assume a market must produce significant value, saying: “Where a commodity which, in reality, nobody would bid for, is to be valued the requirement to assume that a transaction will take place does not oblige the valuer to assume additionally that the market in which that transaction occurs is a competitive one.” However, it also stressed that this did not necessarily mean the value would be nominal, saying: “The willing buyer is not able to use the absence of demand to drive the price down to a level at which the seller would not be willing to transact. Both are willing to deal at the market price.” Overall, however, a nominal value might be the correct result: “Nevertheless, if the characteristics of the premises mean that, in reality, nobody would pay anything for them, the correct conclusion may be that their market value is nominal.” Practical effect Balancing all the specific circumstances of the case, the UT ultimately decided that the consideration which willing parties would agree for the terms to be imposed in that case would be £1,000. It deferred the question whether any and if so what compensation might be payable for any loss or damage that might be sustained by the landowner as a result of the exercise of the Code right, considering that it would be more appropriate to revisit that question as necessary once the effect of the exercise was ascertainable. So, in broad terms, it looks like agricultural value only for corners of fields, and rooftop value only for rooftops. Bad news for landowners, who will now receive payments more akin to those received for statutory wayleaves. Main image © Hartmut Schmidt/imageBROKER/Rex/Shutterstock Guy Fetherstonhaugh QC is a barrister at Falcon Chambers