The Telecoms Code: a new law but little by way of surprise

Posted: 27/09/2019

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Senior associate Laura West looks at how new technology, intensification of demand and the recent decision in EE Ltd and Hutchinson 3G v Sir James HE Chichester [2019] UKUT 164 (LC) might interact in future to shape the landscape under the new Telecoms Code.

A more intensive need for new sites

There are a number of factors which will lead to an increased demand for new sites for operators. One driving force is the differences in 5G technology: compared to 3G and 4G, 5G antennae have a much more limited reach. 5G operates at a higher frequency, which means a reduced range. In a report commissioned for the European Parliament (April 2019), experts noted that the typical range of 5G sites might be limited to 20-150m. In contrast, 3G and 4G sites can cover a range of 2-15km (but can host significantly fewer simultaneous users). The difference might lead to as many as 800 SAWAP (small area wireless access points) 5G sites being needed per sq km.

Demand is also exponentially increasing. Forecasts indicate that the demand for data will hit 1, possibly even 2 petabytes (a petabyte being 1,000 terabytes) – per sq km in major cities by 2025. Current demand in the most active areas – Manhattan, New York, and Kowloon, Hong Kong, has already reached around 0.5 petabytes per sq km in early 2018 (McKinsey and Company, February 2018).

An increased focus on design

5G sites will also bring about an increased focus on the design of sites by operators. 5G sites will require larger exclusion zones than 3G and 4G, due to concerns about the intensity of radiation. As a result, 5G equipment may need to be sited in a zone as large as 20m across (even where a conservative view is taken in respect of the risk to health posed by the installation), in areas where non-specialist personnel, for example air-conditioning technicians, are unlikely to need to work for prolonged periods.

The decision in Chichester

This was a case where the landowner sought to defeat an application for Code rights on the grounds of redevelopment. The landowner proposed to build their own telecoms installation; this would defeat the operator’s application since the Code only allows for rights over land, not equipment. The landowner failed. The Tribunal held that the landlord would not have installed his own equipment where the operator’s application had not been made and, as a result, that he was unable to fulfil the redevelopment test.

The decision is significant because in Chichester the Upper Tribunal confirmed for the first time that the principles decided in S Franses Ltd v The Cavendish Hotel (London) Ltd [2018] UKSC 62; [2019] EGLR 4 will be relevant to decisions under the new Code. In Franses, the Supreme Court held that a landlord’s intention to redevelop must be established independently to any claim for a new tenancy. That is, the landlord must prove to the satisfaction of the court that he would do the same works even if the tenant’s tenancy was not in existence.

The test in Franses and now Chichester

Following Franses, and with reference to the approach of the County Court at central London in London Kendall Street No 3 Ltd v Daejan Investments Ltd [2019] PLSCS 166 the correct approach to intention now requires consideration of three distinct stages. The first two are familiar: (1) subjective intention; and (2) objective intention. For subjective intention, a landlord must demonstrate “a firm and settled intention not likely to be changed… ‘out of the zone of contemplation and into the valley of decision’”, (the classic formulation from Lord Evershed’s speech in Fleet Electrics v Jacey Investments [1956] All ER 99). The usual evidence in this respect being a witness statement containing an undertaking to do the works. The objective element requires the landowner to demonstrate that he has a reasonable prospect of being able to do the works, which tends to be evidenced by proof of the necessary financial resources, planning permissions, etc. The third limb is the new acid test expressed by Lord Sumption in Franses as “whether the landlord would intend to do the same works if the tenant left voluntarily”. This is also referred to as the quality of intention, with a conditional intention (one which depends on whether the tenant will leave voluntarily or not) being insufficient.

Joanne Wicks QC successfully led the tenant’s appeal in Franses. Writing in the Property Law Journal in February this year, she said: “Landlords with genuine schemes, who can explain why they want to redevelop in a rational way, should have nothing to fear. It remains the position that it is for the landlord to decide how it wants to redevelop its property and it is not open to the tenant to seek to persuade the court that it should carry out some other redevelopment which would allow the tenant to remain at the premises.”

Continuing, she noted the importance of demonstrating a “sensible commercial rationale”, that is, a commercial driver for the redevelopment. Wise words. Might evidence of this be easier to demonstrate in telecoms cases than in conventional landlord and tenant matters, given the “no scheme” valuation?

Might “no scheme” assist in finding a commercial driver for redevelopment?

“No scheme” describes the method used under the Code to determine the consideration payable which disregards use of the land for purposes connected with the new Code and assesses the market value of the land with reference only to other uses. The approach has had a very serious effect on the level of consideration; in one instance, producing a figure of £50pa (for the licence fee element of the considerations) where prior to the Code coming into effect, the parties had agreed £21,000 (EE Ltd and Hutchison 3G UK Ltd v The Mayor and Burgesses of The London Borough of Islington [2019] UKUT 53 (LC)).

Given the “no scheme” valuation approach and the corresponding effect on consideration, any landowner with a genuine use for land other than for telecoms purposes should, in theory, find it easy to demonstrate a commercial driver for the redevelopment; other uses are likely to be more profitable in any event. Perhaps more difficult will be defeating applications over rooftop space, however, the changing requirements of operators as a result of the rollout of 5G may yet offer landowners a lifeline.

If the design requirements of 5G and the corresponding exclusion zones make any use of the building roof for prolonged periods impossible, the differences between 5G and previous equipment may provide routes by which landowners are able to defeat new applications. The key to establishing a Franses-compliant intention will be demonstrating that the scheme of works for the redevelopment have practical utility. Alternatively, the differences in 5G technology may even encourage the use of alternative building design, as landowners try to move away from flat roofs. As Wicks QC notes, the landlord has the right to choose how the building will be used, it is not a question of whether the landlord’s scheme of works or design can be modified so as to allow the tenant to stay.

On reflection the decision in Chichester is of no surprise whatsoever. The new Code and expansion of rights and powers conferred on operators fulfils the government’s stated objective: the powers contained in the Code are designed to significantly improve digital infrastructure and facilitate 5G. Had the UT departed from the reasoning contained in Franses in Chichester, it would have cut the legs out from under the Code in one fell swoop.

We understand that there is a further decision pending from the Upper Tribunal in relation to a similar case to Chichester. It will be fascinating to see whether the landowner in that case enjoyed more success in relation to his scheme of redevelopment, in this post-Chichester world.

 

This article was published in Estates Gazette in September 2019.

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