In the latest of our Building Blocks series, Julija Kazlauskaite, Jonathan Cope and Jack Lightburn take a closer look at telecoms wayleave agreements and consider what they are, the provisions likely to be included in a typical agreement and some practical points for the parties to consider.
Most businesses in the UK rely on uninterrupted access to telecommunications (or telecoms) services to ensure the smooth and efficient functioning of their operations. In recent years, as the pace of technological advancement has increased along with consumer demands, a greater focus has been placed on the speed and flexibility of providing business services. This has accelerated the demand for faster and more reliable telecoms, such as fibre optic broadband cables and upgrades to existing telecoms infrastructure, for example the shift from 4G to 5G and, within the next few years, 6G.
Therefore it is no surprise that recent years have seen the increased prevalence of telecoms wayleave agreements in the commercial property sector. Against this backdrop, the coming into force of the Electronic Communications Code (the Code) in 2017 impacted on how such agreements are negotiated and documented and the respective rights and obligations of the parties involved.
In this article, we will break down the key components of a telecoms wayleave agreement and offer some useful pointers for parties to consider before entering into one.
What are wayleave agreements?
A wayleave agreement is a contractual licence or permission granted to (in this context) a telecoms service provider to install and subsequently to repair, maintain, replace and possibly upgrade telecoms infrastructure and associated service media such as cables, wiring or similar equipment on a third party’s land. In the context of telecoms, wayleave agreements are typically utilised for the installation of electricity or fibre broadband cables. This could be across, over or under open land or via defined routes and risers within buildings. Such agreements are often entered into between a landlord and a service provider at the request of a tenant under a commercial lease.
How do telecoms wayleave agreements differ from leases and easements?
A telecoms wayleave agreement grants a specific licence or permission to the service provider, but unlike leases or easements, they do not create an ‘interest in land’ and therefore do not bind successors in title to either party. However, it is important to note that this latter point is subject to certain statutory exceptions and where applicable, the provisions of the Code.
A lease, on the other hand, grants exclusive possession of a defined area for a term and usually at a rent. Leases are typically required by telecoms operators in scenarios where they require more extensive rights than would be granted under a wayleave, for example if the proposed infrastructure to be installed is substantial or complex (such as a mobile masts or EV charge points) or they need to retain greater control of the site.
An easement is a proprietary right granted over one piece of land for the benefit of another piece of land which binds future owners of both. Easements are likely to be appropriate where longer term or permanent rights need to be granted, for example rights to install and keep substantial cabling or pipes under the land, but the service provider doesn't require exclusive possession.
In most cases the landowner will have little say in the form of agreement chosen, as it is the service provider who will be best placed to determine the nature and extent of the rights they need in respect of the relevant telecoms equipment. Whichever form the agreement takes, it must be carefully drafted and negotiated so that the parties’ respective rights and obligations are clearly defined and documented.
Where rights are being granted to install cables or wires to facilitate a telecoms connection, invariably a wayleave will be used. However, it is crucial for landowners to understand that where the wayleave is subject to the Code, the terms of the agreement may not be definitive, as they may be rendered void or superseded by the provisions of the Code.
What is the Electronic Communications Code?
The Code is set out in Schedule 3A of the Communications Act 2003 (as inserted by Schedule 1 of the Digital Economy Act 2017). It replaced a previous telecoms code and went further than the previous code in the rights it affords to telecoms operators. In essence, the Code establishes a comprehensive statutory framework which governs the relationship between Code operators and landowners and the agreements entered into, or imposed on, such persons. The purpose of the Code is to support the rollout of telecoms infrastructure and further the aim of ensuring that the public has a choice of high-quality telecoms services. It is therefore no surprise that the Code makes the process of installing telecoms infrastructure and equipment and documenting such arrangements with landowners cheaper and easier for telecoms providers.
Where the Code applies, it grants ‘Code rights’ to service providers (also known as ‘operators’) to install, maintain, upgrade and share the use of their equipment on a third party’s land. Code rights can apply to written wayleave agreements relating to telecoms equipment as well as to other types of agreement relating to such equipment, including leases and easements. Code rights only benefit those telecoms operators designated by Ofcom as being a ‘Code operator’ (a full list can be found here: Register of persons with powers under the Electronic Communications Code - Ofcom).
Given that Code rights are potentially extensive and, generally, the Code itself is very operator-friendly, it is critical for landowners and tenants to be aware of such rights when entering into wayleave agreements and accordingly they should seek specialist advice in such circumstances.
Who owns and repairs the equipment?
Contrary to the usual common law rules governing whether an item is considered to be a fixture (and therefore forming part of land) or a chattel, the equipment installed by an operator pursuant to a Code agreement will never become part of the land, even if it is attached to it. This means that the landowner and/or tenant will not own the equipment and it will remain at all times the property of the operator.
The operator will be responsible for maintaining, repairing and replacing its equipment. To minimise any disturbance or disruption to the landowner, a wayleave agreement should include conditions for entry which the operator must comply with when carrying out its Code rights, such as prescribed notice periods before entry, defined access areas and permitted working hours.
Term and security of tenure
The wayleave agreement should set out how long the agreement will last and detail any provisions for early termination. This may be of particular importance to a landowner with redevelopment plans, as they will be keen to ensure that they can obtain possession of the land unencumbered by any Code rights when they are ready to carry out the works.
However, wayleave agreements which fall within the ambit of the Code will not automatically end on the termination of that agreement, provided the apparatus continues to be used by the operator for the purposes of the Code. The status of the operator is this scenario is similar to a tenant with security of tenure under the Landlord and Tenant Act 1954 (the LTA 1954). It is important to distinguish between these two types of security of tenure. Whilst both leases with security of tenure and Code agreements will continue beyond the expiry of the agreed term, it is not possible to contract out of the Code. This is a significant distinction to the position with LTA 1954 leases, where the landlord and tenant can agree to exclude security of tenure by following a statutory procedure.
If the landowner wishes to terminate the wayleave agreement, it will need to follow the statutory termination procedure set by the Code (a brief overview of which is set out below).
Costs and wayleave fees
As a rule of thumb, where a third party is asking an operator to install a telecoms connection (which is usually the case with telecoms wayleaves), that third party will be responsible for the operator’s costs. If the party making the request is a tenant under a commercial lease, it should also expect to cover its landlord's costs.
Conversely, where it is the Code operator requesting the agreement, they will be expected to pay the landowner's costs in addition to consideration for the rights granted. The amount of consideration is determined in accordance with a statutory valuation formula and may be payable on an annual basis or it could be a one-off payment, depending on what is agreed (or determined at a tribunal hearing). There may also be compensation payable for any losses suffered by the landowner.
Sharing with another operator
The Code grants rights to an operator to share use of its equipment with another operator without requiring landowner’s consent. These sharing rights will be unconditional if expressly included within the wayleave agreement. If the agreement is silent, the rights are available only if the operator meets two conditions:
- the sharing of the equipment has no adverse impact, or no more than a minimal adverse impact, on the appearance of the property; and
- the sharing does not result in an additional burden on the landowner. This may include hindering the enjoyment of the property or causing damage or additional expense to the landowner.
The wayleave agreement cannot exclude the statutory right to share use of the equipment nor can it impose any other conditions on the operator other than those set out above.
Assignment
Another significant right given to operators under the Code is the ability to assign the wayleave agreement to another Code operator without landowner's consent. This applies even where the wayleave agreement expressly prohibits assignments by the operator, as such a prohibition is void under the Code.
This right to assign does come with one catch for operators. The assigning operator can be asked to guarantee the performance of the incoming operator’s obligations under the wayleave agreement. As a concept, this is similar to an authorised guarantee agreement (AGA) which can be required by a landlord as a condition of agreeing to the assignment of a commercial lease. As with an AGA, the guarantee only lasts for as long as the assignee operator remains bound by the wayleave agreement.
Lift and shift
Lift and shift provisions allow for a landowner to serve notice on an operator requiring the operator to move its equipment, usually to another location designated by the landowner within the landowner’s property. If these provisions are included, the parts of the Code relating to termination of agreements and removal of equipment will need to be given careful consideration. All relocation costs would generally be paid for by the landowner, which is something for the landowner to bear in mind prior to triggering the provision as such costs could be significant.
Termination and reinstatement
If the landowner wishes to terminate the wayleave agreement, it must serve not less than 18 months' notice on the operator, ending after the agreement would have come to an end if not statutorily continued by the Code. In addition, the landowner must satisfy one of the following four statutory grounds:
- Substantial breaches by the operator of its obligations in the Code agreement;
- Persistent delay by the operator in making payments under the Code agreement;
- The landowner intends to redevelop all or part of the land, or neighbouring land, and could not reasonably do so unless the Code agreement ends; and
- The paragraph 21 test is not met, which essentially means that either the prejudice to the landowner in granting a renewed Code agreement cannot be adequately compensated by money, or the public benefit in granting the renewed Code agreement does not outweigh the prejudice to the landowner.
This statutory procedure is a significant hurdle to ending a Code agreement and acts as a trap for the unwary, particularly where securing vacant possession is needed in a proposed redevelopment scenario. Landowners who are used to the equivalent procedure under the LTA 1954 will be in for a shock if they are not aware of the more operator-friendly requirements under the Code, particularly the longer notice period.
Removal of apparatus
The wayleave agreement should cover matters such as the removal of the equipment and reinstatement of the property following termination. The operator should be required to make good any damage caused to the landowner’s satisfaction.
Landowners unfamiliar with the Code may be surprised to discover that terminating the Code agreement in and of itself does not entitle it to require the operator to remove its equipment. There is an entirely separate procedure in the Code which must be followed when requiring an operator to remove its apparatus and equipment from the land. As above, this can have an adverse impact on redevelopment plans if the landowner isn’t alert to what is required.
Some practical considerations
In addition to the above points, landowners and tenants should also consider the following practical considerations:
- Where will the equipment be installed? A wayleave route should be as specific as possible, ideally with the full dimensions and comprehensive plans attached to the agreement.
- Method statement – Often the operator will prepare a method statement to attach to the agreement, which would typically include details of the installation works and a description of the equipment itself.
- Will any consents be required? For example, planning permission, building regulations approval or compliance with health and safety regulations. Wayleave agreements will usually require operators to exercise their rights in accordance with all applicable laws and any necessary consents.
- Investigate early – whether you are a prospective or existing landowner looking to develop the property or a prospective tenant, it is prudent to start investigations early. Is there any existing telecoms equipment into which a connection can be made or which needs to be removed? Taking appropriate action and obtaining searches and surveys early on in a transaction is recommended.
The above is intended as a general overview of wayleave agreements and is not a comprehensive analysis of the relevant law and background. If you have any questions on the above or require advice in this area, please contact our real estate team.
Jack Lightburn
Jonathan Cope
Julija Kazlauskaite