Tribunal unable to impose new Code agreement over occupied site

Out-Law News | 08 Apr 2019 | 9:12 am | 6 min. read

The Upper Tribunal (Lands Chamber) has no jurisdiction to impose rights under the Electronic Communications Code ('the Code') in favour of an operator of telecommunications equipment, where a third party is currently occupying the land, it has concluded.

The tribunal dismissed an application by Cornerstone Telecommunications Infrastructure Limited (CTIL) (26-page / 686KB PDF), which was seeking the grant of Code rights in its favour in relation to a mast located near the Didcot to Swindon railway line. Another operator, Vodafone, is currently occupying the site, although its lease of the land expired in 2017.

As the third substantive decision on the application of the new Code, which entered into force in December 2017, the tribunal's ruling is significant for both landowners and operators, according to property disputes experts at Pinsent Masons, the law firm behind Out-Law.com. In its ruling, the tribunal noted that CTIL's reference "raises a number of important issues for the first time".

Property disputes expert Michael Smith of Pinsent Masons said that the question of whether the tribunal had jurisdiction to confer the Code rights sought by CTIL was of significance to landlords as well as operators, "who in practice are often being informed by CTIL or its representatives that it is the commercial preference of Vodafone to take new agreements in the name of CTIL". CTIL is a joint venture between Vodafone and Telefonica O2, set up to own and manage their combined portfolio of telecoms sites.

"This decision indicates that it may not always be as simple as CTIL seeking a new agreement/rights from landowners in CTIL's name going forward," Smith said.

"As the decision indicates, there had been a potential route through for CTIL in this case: the tribunal said that it 'could have reached agreement with Vodafone for it, as occupier, to confer rights on [CTIL], and could then have asked the tribunal to impose an agreement providing for those rights to bind the respondent' - but it did not do so. It will be interesting to see how CTIL re-groups going forward in relation to similar cases – I would not be surprised to see it seek to appeal as this decision has the potential to cause it problems," he said.

The Code governs the relationships between landowners and operators of electronic communications services licensed by Ofcom. It gives operators certain rights to install, inspect and maintain electronic communications apparatus including masts, cables and other equipment on public and private land, even where the operator cannot agree the necessary rights with the landowner.

A new Code, intended to support the government's vision for the UK's digital future, came into force on 28 December 2017.

Vodafone was granted a 10-year lease over the site on which the mast at issue in this case is located in 2004. It has continued to occupy the site since the lease expired in 2014. The landlord, Compton Beauchamp Estates, had separately applied to repossess the site from Vodafone, after negotiations over a new lease broke down. CTIL has now applied to the tribunal to have a new lease to its own benefit, with accompanying Code rights, imposed on the landlord.

Under the Code, a right in respect of land may be acquired by an operator "by an agreement between the occupier of the land and the operator". If the operator is unable to reach agreement with the occupier of the land or another "relevant person", the court may impose either an agreement to confer Code rights on the operator or to bind the relevant person. The test which must be satisfied before the court can impose such an order is set out in the Code, and requires the public benefit of the order to outweigh the prejudice to the relevant person as well as "adequate compensation" to be paid.

The tribunal, in its ruling, said that it was "obvious from the nature of the Code rights" why they could only be conferred by the occupier of the land. These rights, in the words of the tribunal, "authorise an operator to be present on the land and to do things there which are likely to interfere significantly with the ability of anyone else to make use of it". 'Occupation', for the purposes of the code, was a question of fact, rather than a matter of legal status: it means "physical presence on and control of the land".

In this case, the 'occupier' was clearly Vodafone. For that reason, the only party CTIL could seek Code rights from was Vodafone and not Compton, the landlord, as sought in its application.

"[CTIL] relied on the fact that [Compton] has itself issued possession proceedings against Vodafone in which it asserts that it is entitled to possession, but we do not regard that as relevant to the question of occupation," the tribunal said. "A legal entitlement to possession, on the one hand, and occupation for the time being, on the other, are not the same thing."

"It follows that [Compton] could not have complied with the paragraph 20 notice given to it by [CTIL] ... It was not the occupier and ... could not enter into an agreement to confer Code rights without first going into occupation. It could not do that without Vodafone's agreement, because Vodafone's apparatus was lawfully on the site. That problem could no doubt have been overcome with Vodafone's cooperation, but the agreement proffered by [CTIL] said nothing about Vodafone," he said.

Turning to whether the tribunal had jurisdiction to impose an order on Compton regardless, the tribunal ruled that it could not. He said that doing so "involves the imposition by the tribunal of intrusive rights on unwilling parties" in a way analogous to compulsory acquisition. The tribunal should therefore take a "cautious approach" to doing so, only after the operator strictly followed the procedure set out in the Code.

"The clear effect of the procedure is that if the relevant person has not been asked to agree to confer the rights or to be bound by them, no application may be made in respect of them," the tribunal said.

"If [CTIL's] notice had been framed under paragraph 20(1)(a), requiring rights to be conferred on it by the occupier, we do not consider the tribunal would have jurisdiction to make an order under paragraph 20(4)(b) providing for the rights to bind that person because they are not in occupation. [CTIL] could have reached agreement with Vodafone for it, as occupier, to confer rights on [CTIL], and could then have asked the tribunal to impose an agreement providing for those rights to bind [Compton], but it did not do so," he said.

"The Code is a complex piece of legislation affecting many landowners; it is in its infancy and its effects are being worked out through a series of decisions of the tribunal which, invariably, are vigorously contested. In those circumstances we do not consider that it is open to [CTIL] to ask the tribunal to proceed on a different basis from that which it has claimed and for which it has argued," he said.

Having disposed of CTIL's application, the tribunal went on to consider two other issues of potential significance for operators and landowners. The first was whether CTIL's application would have met the 'public benefit' test set out in the Code. The tribunal concluded that it would have done, given the precarious nature of Vodafone's rights over the land. However, this would not necessarily have been the case if Vodafone still had a right to possession of the site, as provided for by the original lease.

"Whilst ultimately a redundant issue in this case, the tribunal briefly addressed the imposition test in paragraph 21 of the Code and suggested that the tribunal would have faced a 'difficult decision' as to whether the second condition – the 'public benefit test' - would have been satisfied had the operator occupied the site as a periodic tenant," said Michael Smith. "This is another interesting aspect of the judgment that will leave practitioners carefully reviewing the status of an operator's ongoing occupation, particularly where agreements have long expired."

The tribunal also made some "observations" on the consideration and compensation provisions in the Code. The tribunal criticised valuation approaches put forward by both the operator and the landowner, but noted that rural landowners had different concerns about giving up the use of their land to urban ones. The tribunal also dismissed Compton's claim for compensation based on loss of rental income from Vodafone as "ingenious but unsustainable".

"The tribunal made it abundantly clear that it would be unimpressed by valuations on the part of any party that resulted in figures that were 'improbably high or low', as the tribunal indicated in this case," said property disputes expert Ian Morgan of Pinsent Masons. "The valuer for the intended operator put forward a valuation that resulted in a 'rent' of £26 over the total 10-year term of the agreement, whereas the valuer for the land owning site provider thought that the figure should be as high as £9,500 per year."

"The tribunal said that it hoped 'the evidence presented in future references involving rural property will focus more closely on specific transactions in relevant comparable situations'. All those operating in this sector would be well-advised to heed this guidance," he said.