The Upper Tribunal recently delivered its decision in the case of EE Limited (EE) & Hutchison 3G UK Limited (H3G) v AP Wireless (APW) ("the Vache Farm decision") opening the doors for increased rents on rural telecoms mast sites. The Vache Farm decision significantly increases the benchmark rent payable under the Electronic Communications Code ("the Code"), which will be welcome news for landowners.
Background
The case considered the level of rent that is deemed appropriate under Code agreements. It also considered when and in what circumstances a landowner should be able to terminate a Code agreement early.
The case related to a lease renewal of a rural mast site at Vache Farm in Buckinghamshire. The rights granted under an earlier lease had continued under the Code following the expiry of the contractual term in May 2020. The operators, EE & H3G, sought new Code rights from their landlord, APW, and the two matters in dispute which the Tribunal had to decide were the level of rent and the landlord termination provisions. The site was described as an "unexceptional rural site" located in a grass field beside a wooded area.
Increased rents for rural sites
The Tribunal was invited to consider the appropriate rent for an "unexceptional rural site". Prior to the Vache Farm decision, the Tribunal had settled on rents of £750 per annum for comparable sites. APW challenged this, leading expert evidence which considered rental rates for similar non-telecoms sites.
Upon considering APW's expert evidence, and also accounting for inflation in the intervening period since the Tribunal was last asked to consider appropriate rental value, the Tribunal determined that their earlier figure of £750 was too low and that the appropriate level of rent for a site of this nature is £1,750 per annum. The Tribunal also highlighted that inflation should be applied to the rental figures previously determined by the Tribunal.
Landlord termination
The Tribunal also had to rule on the appropriate landlord termination provisions in a Code agreement. APW sought to include terms that would allow them to terminate the lease at any time for redevelopment purposes. EE & H3G argued for a more limited redevelopment break (excluding telecoms) to be available only on or after the fifth anniversary of the term commencement date.
The position adopted by EE & H3G reflects the position which most site providers will be familiar with as operators wish to secure a minimum term in order to recoup any investment which they have made into the site.
The novel position which was decided in this case arose from APW's position as an infrastructure provider and whether they could therefore rely on the redevelopment break clause where redevelopment meant use of the site for telecommunications (i.e. that the site provider could build a new mast).
Whilst agreeing with the restriction proposed by EE & H3G that the redevelopment break should only be exercisable after five years, the Tribunal concluded that it is not the Tribunal's policy to obstruct redevelopment and therefore, providing the intention to redevelop is genuine, the redevelopment could include telecommunications. This would allow a site provider like APW to terminate a telecoms agreement under the redevelopment break clause, build their own mast on the site and subsequently negotiate a new lease with the operator for a higher non Code rent.
Implications
The Vache Farm decision represents a significant shift in favour of site providers, giving them more power in negotiations with operators to demand higher rents and secure redevelopment break clauses.
If you are an operator, infrastructure provider or landowner dealing with telecoms agreements, or you have any concerns or questions about the impact these issues may have on you or your business, please do not hesitate to get in touch with our Telecommunications lawyers or your usual Brodies' contact.
