Move to standardise how telco land rent renewals are calculated

The move also addresses a risk that landowners currently face of being ordered to repay rents they have received at the point legacy agreements with telecoms operators are renewed, according to experts at Pinsent Masons.

In 2017, a new Electronic Communications Code came into force. The Code governs relationships between landowners and operators of electronic communications services licensed by Ofcom. It gives operators certain rights to install, inspect and maintain equipment such as masts, cables and other communications apparatus on public and private land, even where the operator cannot agree the necessary rights with the site provider.

A central purpose of the 2017 Code was to make it cheaper and easier for apparatus to be deployed, maintained, shared and upgraded. 

In line with that objective, the 2017 Code altered the way Code agreements between landowners and operators are to be valued. In short, the change means rent rates must effectively be based on concepts similar to compulsory purchase order (CPO) compensation which disregard the fact that the site has a telecoms use – a factor that previously resulted in premium rent rates being set by landowners. Case law has subsequently evolved to significantly dampen the value that landowners can expect to obtain in rent via agreements reached under the 2017 Code.

The 2017 Code applies to agreements formed between landowners and operators after the Code took effect. However, telecoms sites occupied under legacy agreements that are governed by the Landlord and Tenant Act 1954 in England and Wales and an equivalent order in Northern Ireland from 1996 must still be renewed under that legislation, meaning that where parties are unable to agree on the new rent, the rent will be determined by undertaking a traditional open market valuation in accordance with that legislative framework.

In some cases, the legacy valuation framework has produced higher rents than would otherwise be ordered if the agreement was subject to the new framework. The differing approaches to valuation have resulted in considerable litigation since the 2017 Code came into force; arguments as to the correct status of occupiers, their agreements and the route of renewal have, in many cases, all been driven by the potential different sums which would ultimately fall to be payable by operators.

In a bid to align the valuation frameworks, the law was further updated in 2022 to provide for new regulations to be introduced to ensure that the renewal of legacy 1954 Act agreements are governed, in valuation terms, by the 2017 Code’s valuation methodology.

More than two and a half years later, the government has now set out draft new regulations to implement these changes. Its consultation on the reforms is open until 2 July 2025.

“When commenced, the changes will alter the financial terms on renewal of relevant leases,” the government said. “They do this by replacing the valuation frameworks contained in the 1954 Act and the 1996 Order with provisions that mirror those in the Electronic Communications Code. This will ensure the method of calculating rent for renewal agreements conferring Code rights is more consistent across the UK.”

The proposed transitional regulations also address what the government calls the “backdating issue” by dealing with the question of what sums should be paid during the interim period where a renewal procedure has been initiated under the legacy 1954 Act regime until new rent agreements take effect. To address the fear that existing rules could leave landlords having to repay sums received over long periods, the regulations provide for a ‘dual assessment’, meaning that sums which are lower as a direct consequence of these transitional regulations are treated differently.

Shannon Breeze of Pinsent Masons highlighted that the government’s proposals provide a window for landowners to renew legacy 1954 Act agreements with operators on the basis of the legacy valuation framework. This is because, as the government described, the draft regulations provide that the renewals provisions “do not apply to live tenancies for which a notice has been served seeking the termination or renewal of the lease, and when the date specified in that notice (the ‘relevant date’) falls before the date on which the renewals provisions come into force”.

Breeze said: “The proposed regulations provide some welcome certainty for those 1954 Act renewal notices that will have been served prior to the date the regulations take effect, and it is likely that we will see an influx of section 25 notices served by landlords looking to take advantage of the lack of retrospectivity the regulations present.”

Pierre Smith, also of Pinsent Masons, added: “These changes have been long awaited. For many years, both operators and landowners have had to make decisions about the future of existing sites falling within the 1954 Act regime without full clarity on how rents may be determined if an agreement cannot be reached. It will be hoped that this news marks a final step towards a full transition to calculating rents under the valuation framework first implemented in 2017. If this law comes into force as proposed, it will mean that whether you are entering into a new Code agreement or initiating a renewal of an existing agreement, the new rent will be valued in the same way. That, hopefully, is one less thing for litigants to trouble the courts with.”

He added that the proposal to clarify the position about interim rents in Northern Ireland is also to be welcomed, given the status of recovering these had been uncertain up until now.