Telecoms: Upper Tribunal fixes rent payable under Code agreement of water tower
The Upper Tribunal has settled the financial terms of a new agreement conferring rights under the Electronic Communications Code set out in schedule 3A to the Communications Act 2003 in EE Ltd and another v Affinity Water Ltd [2022] UKUT 8 (LC).
The site, a fenced compound containing two equipment cabinets connected to antennas on top of a water tower, formed part of Allenby Road Reservoir in Southall, west London, owned by the respondent, a statutory water undertaker. A 20-year lease of the site granted in 1998 and contracted out of the provisions of the Landlord and Tenant Act 1954 became, on expiry, a “subsisting agreement” under the Code. The claimant commenced proceedings for the tribunal to impose an agreement under paragraph 34(10) of the Code. By the date of the hearing in November 2021 the parties had agreed all terms save consideration for entering into the agreement and initial compensation for the respondents under the Code.
The consideration payable by an operator to a site provider is the amount representing the market value of the site provider’s agreement to confer the Code right, being the sum which a willing buyer would pay a willing seller for the agreement in an arm’s length transaction. There was some debate about whether or not vacant possession of the site is to be assumed. The judge considered it to be axiomatic that the willing buyer and willing seller are hypothetical persons, and since negotiations with an operator in occupation cannot be described as “at arm’s length”, the exercise requires an assumption that the actual occupier has vacated the site and removed all equipment by the valuation date.
The Upper Tribunal has settled the financial terms of a new agreement conferring rights under the Electronic Communications Code set out in schedule 3A to the Communications Act 2003 in EE Ltd and another v Affinity Water Ltd [2022] UKUT 8 (LC).
The site, a fenced compound containing two equipment cabinets connected to antennas on top of a water tower, formed part of Allenby Road Reservoir in Southall, west London, owned by the respondent, a statutory water undertaker. A 20-year lease of the site granted in 1998 and contracted out of the provisions of the Landlord and Tenant Act 1954 became, on expiry, a “subsisting agreement” under the Code. The claimant commenced proceedings for the tribunal to impose an agreement under paragraph 34(10) of the Code. By the date of the hearing in November 2021 the parties had agreed all terms save consideration for entering into the agreement and initial compensation for the respondents under the Code.
The consideration payable by an operator to a site provider is the amount representing the market value of the site provider’s agreement to confer the Code right, being the sum which a willing buyer would pay a willing seller for the agreement in an arm’s length transaction. There was some debate about whether or not vacant possession of the site is to be assumed. The judge considered it to be axiomatic that the willing buyer and willing seller are hypothetical persons, and since negotiations with an operator in occupation cannot be described as “at arm’s length”, the exercise requires an assumption that the actual occupier has vacated the site and removed all equipment by the valuation date.
However, the parties had agreed that the site must be assumed already to be an equipped telecommunications site, so that the incoming operator would take over the apparatus on the site on the valuation date. The experts agreed that, in view of the no-network assumption, the approach to valuation was the three-stage valuation approach adopted in Cornerstone Telecommunications Infrastructure Ltd v London and Quadrant Housing Trust [2020] UKUT 282 (LC) rather than the comparative method based on market evidence. Decided cases had determined annual consideration of less than £1,000 for rural sites and up to £5,000 for city centre sites.
Stage 1 of the three-stage valuation approach requires assessment of the current or highest alternative use of the roof of the water tower and land at ground level, agreed in the nominal sum of £62.50.
Stage 2 requires an assessment of the additional benefit conferred on the tenant by the agreement, which involved reviewing the respondent’s annual expenditure on the site and apportioning it between the various users of the site, which amounted to £1,400.
Stage 3 requires an adjustment to reflect the adverse effects of the agreement on the respondent of managing the claimants’ access to the site, which was assessed at £1,550. These sums total £3,012.50 which the tribunal rounded to £3,000. A final allowance for the benefit to the claimants of a flexible break clause brought the rent figure to £3,300 per annum, and compensation for professional fees was assessed at £7,500.
Louise Clark is a property law consultant and mediator
