Resisting "Code Rights": lessons for developers and landowners

Resisting "Code Rights": lessons for developers and landowners

Resisting "Code Rights": lessons for developers and landowners

The recent decision in EE Limited & Hutchison 3G UK Limited v Sir James HE Chichester & Others [2019]  highlights the challenges involved in trying to free land from existing telecommunications agreements. 

While the decision has provided welcome clarification for landowners who want to resist applications by telecoms operators to impose code rights on grounds of redevelopment, the Code still represents a significant obstacle to development of affected sites.

The new Electronic Communications Code (“the Code”) was introduced in December 2017, aiming to improve communications infrastructure and clarify rights between telecoms operators and landowners. The Code is seen as being favourable to network operators and gives wide rights to install and maintain telecoms apparatus on private and public land or buildings.

In this case two competing network operators who shared the infrastructure (“Operators”) sought rights pursuant to the Code over land owned by Trustees of the Meyrick Estate. The Operators had four leases of telecoms masts which expired before the introduction of the Code. When negotiations to renew the leases were unsuccessful, the Operators served notice under paragraph 20 of the Code applying for Code rights to be imposed by the Tribunal.

Although the Code is favourable to telecoms operators, landowners are afforded a small amount of protection. Paragraph 21(5) of the Code permits landowners to resist the imposition of Code rights where this would prevent their intended redevelopment of the land.

Paragraph 21(5) is modelled on s30 (1) (f) the Landlord and Tenant Act 1954 (“1954 Act”) which allows a landlord to oppose renewal of a business lease if it intends to redevelop. Last year’s Supreme Court case of S Frances Ltd v The Cavendish Hotel (London) Limited [2018] (“Cavendish”) set out new guidance on what that intention must involve to successfully oppose the grant of a new lease.

The Trustees’ claim was that they proposed to install their own masts in place of the Operators’ masts to provide a wireless broadband network for the Estate. As electronic communications equipment is itself expressly excluded from the definition of “land” in the Code, if their own masts were installed, the Tribunal would not be able to subject them to Code rights. The Trustees would have been able to impose their own terms with the Operators and negotiate higher rents. The Tribunal had to decide whether the Trustees could rely on paragraph 21(5) of the Code to prevent Code rights being imposed.

The Tribunal referred to the principles that apply to a landlord opposing renewal of a business lease under the 1954 Act on redevelopment grounds. It specifically considered whether the Trustees had the requisite intention to carry out the redevelopment. The Tribunal adopted the approach set by Cavendish which clarified that a landlord’s intention to redevelop must not only be a firm and settled intention, but it must also be unconditional, i.e. the scheme of works relied upon cannot be contrived simply to end the tenant’s lease.

The Tribunal accepted that the Estate’s redevelopment was feasible but found it would be uneconomic. The Estate had the resources to implement it and had planning permission, but the Tribunal did not accept the Trustees’ intention was unconditional. The Tribunal found it wholly implausible that the Trustees would waste resources on an unprofitable scheme, and found that in reality the redevelopment plans were only conceived to defeat the Operators’ claim for Code rights.

This decision will be of some comfort to developers and landowners who have a genuine intention to redevelop, but is a reminder of the evidential hurdles to be overcome to successfully oppose Code rights on the grounds of redevelopment. Those evidential hurdles sit alongside other challenges including the significant notice requirements under the Code.

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