LAND JOURNAL

Why standardised leases can help telecoms talks

Payments guidance and standardised leases can speed up negotiations between landlords and telecoms operators, meaning fewer costly court cases – not to mention better connectivity for communities

Author: Sarah Eynon

12 October 2021

Close-up of telecoms mast from below

With digital connectivity now crucial to every part of our lives, we must remember that we need the mobile digital infrastructure in place if networks are to function correctly. To ensure this, mobile network operators (MNOs) need to agree leases with asset owners to place masts on land and buildings.

The UK government introduced the Electronic Communications Code in 2017 to support deployment of mobile infrastructure and remove commercial barriers to better connectivity. With the advent of the code, the money, or consideration, payable in respect of the lease is determined on a no-scheme or no-network basis, similar to compulsory purchase, where the intended purpose for which the land will be used is not included in the value of the land. The code also makes explicit provision to give MNO tenants rights to share the site with other such operators and add further equipment.

However, there is still a twofold challenge to fulfilling this ambition of better, quicker mobile roll-out.

First the code is not clear in certain key respects. For instance, in the common situation of a lease nearing expiry, should renewal be based on its existing terms, or reflect the code? EE Ltd and Hutchison 3G UK Ltd v Duncan [2021] CSIH 27 clarifies this particular question by deciding that, in general, lease renewals should be based on code terms.

Parties now have clear direction: where the lease has ended, the code applies to new and existing sites. This year's consultation that ended in March is expected to help with other areas of uncertainty in the code.

These include:

  • issues relating to obtaining and using code agreements
  • rights to upgrade and share
  • difficulties specifically relating to the renewal of expired agreements.

But the difficulties don't end there.

The second challenge is that digital telecommunication is still considered a specialist area. Consequently, many landlords are not comfortable negotiating directly with operators to site telecommunications equipment on their property. They may then choose to avoid the issue, but this then carries the risk of potential tribunal action.

Alternatively, they may instruct third parties to represent them. With this comes the expectation that the landlord is equipped to give clear and considered instructions; but if they have no experience or knowledge of the sector or best practice guidance, some landlords may find this difficult.

The dilemma for landlords is whether to focus on income for themselves and control of their asset, or to enable better connectivity for the wider community. While the code was intended to tip the balance in favour of the latter by removing the potential for charging old-level, higher rents, landlords must in practice still make a decision, and where required instruct agents accordingly.

Negotiations and agreeing a lease are not necessarily straightforward processes. In the mobile telecommunications sector it is the tenant who usually provides the standard lease, including terms often weighted in their favour. This means negotiations are required to rebalance the document, but in some cases they can result in landlords refusing to negotiate.

This results in a them-and-us culture and a lack of trust between parties. While the direct outcome has been costly tribunal cases, the ultimate losers are communities and businesses that rely on good connectivity to live and work. There is, however, a new option.

Telecoms mast at Ettrick Valley, Scotland
Support across Scotland

The Infralink programme can provide a helping hand for landowners and MNOs. Funded by the Scottish government and led by the Scottish Futures Trust, it offers an alternative way to reach agreement on fourth- and fifth-generation (4G and 5G) telecommunications sites. By taking best practice from across the UK to create standardised leases and payment guidance, negotiations will be more efficient for both parties, who start from an informed and balanced point.

The guidance produced by Infralink applies to land and buildings across both the rural and urban areas of Scotland, attracting greater inward investment and improving national connectivity. By using similar standardised leases and payment guidance, one combined authority in the West Midlands has already shortened lease negotiations by six months.

The standardised leases remove the need to negotiate stock terms, thereby allowing the parties to focus on the nuances of the site. Using the already mediated Greater London Authority (GLA) templates as a base document, the Infralink team has worked with legal firm DWF to make terms appropriate for less urbanised settings in Scotland, engaging with MNOs and infrastructure providers such as EE, Cornerstone and MBNL, and public-sector stakeholders to get feedback.

Standardised approach

DWF partner and head of telecoms Catherine Haslam, who also sits on the RICS Telecoms Expert Working Group, comments that 'the GLA templates seemed like the natural choice for the basis of the Infralink templates. They had already been heavily negotiated, and moderated by the BSI, with input from representatives across the telecoms sector, and endorsed by a number of the main players in the sector, including RICS.

'We believe that parties will feel more comfortable implementing templates with which the sector is already familiar. This will significantly cut down the negotiation time for new code agreements, and enable the speedy roll-out of new, much-needed installations.'

The payment guidance meanwhile sets out a recommended methodology and prices for a variety of sites, using existing land values and building on the principles of case law relating to the code. This guidance also recognises the impact of digital infrastructure for landlords, and suggests figures that can be used as a credible starting point for discussions.

In support of potential public-sector landlords, consideration has been given in the development process to areas such as subsidy control and the best consideration that can reasonably be obtained, to remove resource burden and reduce the risk of legal challenge.

Standardising arrangements in the sector has to date been done at an organisation by organisation level. The agency Forestry and Land Scotland has been a leader in this area, moving from a reactionary, case-by-case approach towards a more effective and efficient uniform strategy.

Forestry and Land Scotland land agency programme manager James Higgins explains how other organisations can benefit from what it has learnt. 'Adopting a standardised way of dealing with digital infrastructure site requests is new to lots of public-sector organisations. Infralink can provide support to help them through the process.'

Infralink published the first version of its standard documents and payment guidance in March 2021 and the response has been positive. Belinda Fawcett,  general counsel and director of property and estates at Cornerstone, which deploys infrastructure across the UK on behalf of MNOs Vodafone and O2, comments: 'We need faster mobile deployment, and working with the Scottish Futures Trust on the Infralink programme will help us to simplify and streamline our network roll-out process. We are now making progress through the Infralink initiative to help improve digital connectivity for communities and businesses across Scotland.'

Telecoms mast at Strathconan, Scotland
Further development

More is still to come: Infralink is developing a connectivity marketplace, an online map-based application for MNOs and local authorities to monitor connectivity levels, plan mobile deployments collaboratively and identify public-sector assets that could help improve mobile connectivity and capacity.

The marketplace will also offer a shop window for those public-sector bodies interested in discussing connectivity in their area with potential MNOs. It will enable them to set out the terms upfront and use data to inform their discussions.

The first regional test area for the marketplace is Tay Cities covering Angus Council, Dundee City Council, Fife Council and the Perth and Kinross Council areas and is expected to go live next spring.

While Duncan has helped remove one hurdle for those that support better connectivity, the need remains to improve the way parties engage and negotiate. As a free national initiative, Infralink can aid landlords and tenants to carry out more efficient negotiations, as well as help to improve estate management and foster a more positive relationship between the parties.

Sarah Eynon is an associate director in the digital infrastructure team at the Scottish Futures Trust and the Infralink programme lead
Contact Sarah: Email

 

Related competencies include: Landlord and tenant, Legal/regulatory compliance, Valuation

RICS Telecoms Conference 2021
Tuesday 2 November – Wednesday 3 November

On the path to recovery, in this conference, we will discuss the shape of the industry, developments to the code, latest consultations, telecoms planning and will analyse, with expert professionals, the future economic outlook, exploring 5G and its practicalities. We will also invite DCMS to provide an exclusive keynote on the UK government's ambitions for connectivity and overall digital transformation.

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