The new Telecoms Code’s effect on site valuation

“Code rights” in the new Electronic Communications Code (the Code), introduced by the Digital Economy Act 2017, are established by agreement between a network operator and occupier – or the operator may resort to the Upper Tribunal (Lands Chamber) (the UT) to impose code rights. Rights are wide ranging. They bind successors in title and subsidiary interests. The operator can assign the rights notwithstanding any agreement to the contrary, share the use of the site with another operator and upgrade the apparatus covered by the agreement. The restraints on this freedom are minimal: changes must have no more than a minimal adverse impact on the appearance of the structure; nor must they impose an additional burden on the occupier or other party to the agreement. The detail Part 4 of the Code sets out the power of the UT to impose an agreement for code rights. It must be satisfied that money can adequately compensate the grantor, and that public benefit will outweigh the private inconvenience of the occupier. An order must make arrangements for payment and more details of this are given in paragraph 24 of the Code. The payment must be “an amount or amounts representing the market value of the relevant person’s agreement to confer or be bound by the code right…” The Code then goes on to define market value in paragraph 24(2) 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.” This is a different definition of market value from that in the RICS Red Book, coming closer to our understanding of the concept for taxation and compulsory purchase purposes. The devil So far, so good, so simple. But the Code goes on to state some assumptions for the assessment of market value. This is where problems begin. The first assumption is that “…the right that the transaction relates to does not relate to the provision or use of an electronic communications network”. Section 32 of the Telecoms Act 2003 defines a network widely. The second assumption tells us that, for market value, the right to assign, share and upgrade does not apply. We must also assume that the buyer has a choice of available sites. There is nothing in the Code which tells us about the “no network world” for valuation purposes, in which the site is not part of an electronic communications network, and the operator has no rights to share, upgrade and assign. In practice then, how are we to establish market value? Operators are reported to be offering payments which are much lower than their previous levels in the belief that this is what the Code means. What is left, given the statutory disregards? A site over which a user has rights of secure possession, binding on successors in title, to come and go as they wish and, it would seem, to be considered for any lawful use other than as part of an electronic communications network. Perhaps, then, a site for the local troupe of bagpipers to practise every week? What would the seller, acting prudently and with full knowledge of the transaction make of this? Indeed what transaction are we to envisage given the statutory disregards? The task is to establish a market value which would be a price acceptable to the seller. In a purely private deal, the vendor has the perfect right to walk away. The ability of the UT to impose an order obscures this picture but it is a vital point, bolstered by the requirement that money must be able to compensate the owner adequately. This must mean the quantum as well as the principle of payment. In search of answers What have other courts made of similar problems? Perhaps we should take the “Indian case” –  Raja Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer, Vizagapatam [1939] AC 302 – as our starting point, with its reference (citing an earlier decision) to the outcome of a “friendly negotiation”. The case concerned the compulsory acquisition of marshland to build a harbour. A line of tax cases on market value has also established some general principles: a willing seller is not an anxious one (Inland Revenue Commissioners v Clay [1914] 3 KB 466), no single method of sale is to be preferred over another, land may be lotted suitably if that would achieve a better price and special purchasers may be considered where appropriate. Comparable evidence will be vital, but of what? The challenge here will be to weigh and evaluate evidence from different sources: Code agreements; agreements made before the new Code came into effect; agreements for other (non-telecoms) use of small areas of land. Rarely is comparable evidence inadmissible; weight, analysis and comparison will be the heart of the issue. Ultimately it will be for valuers and the UT to untangle these apparently simple, but in reality challenging, valuation provisions. The Code goes on to provide some further “compensation” provisions, but they too raise more questions than answers. A story for another day perhaps. Charles Cowap is a rural practice chartered surveyor