Michael Upton

Rents for rural sites

Para. 24 of the Code provides how rents are to be valued by the Lands Tribunal and the Upper Tribunal in England, which of course set the bar for consensual transactions. The object of para. 24 is for operators to be able to obtain sites at significant discounts below market values. It does so chiefly by requiring a ‘no-network’ assumption, i.e., the proposed use of the site for telecommunications is to be disregarded.

After initial uncertainty about what that would mean in pounds, shillings and pence, by 2020-22 a ‘tariff’ of rents emerged from judgments; annual figures for sites of different types which would apply normally, though the Tribunals left room for a landlord to argue that his site is not normal.

With some simplification, by this year the tariff looked like this:

However, on 29 July, EE Ltd. v AP Wireless II (UK) Ltd., [2024] UKUT 216, concerning Vache Farm, Bucks., held that “the appropriate annual consideration for a rural mast site is £1,750”. That is an increase of £1,000 over the previous rate.

In Vache Farm, it was common ground that the ‘tariff’ rents must be adjusted in line with the R.P.I. In round numbers that alone brought £750 up to £1,000, so the increase to £1,750 was well above inflation. At the same time, the judgment is not authority for an across-the-board hike of all Code rents; it is not the telecoms equivalent of Heil v Rankin, which increased solatium for personal injuries generally in 2001.

Vache Farm turned on acceptance of the relevance of specific evidence for the landlord of rents for small, rural non-telecommunications sites - such as meteorological stations, borehole compounds and noise-monitoring compounds. The relevance would be most direct if the site at issue could be used for purposes which might command such a rent. But absence of alternative possible uses did not mean that the landlord was to be taken to be willing to accept a purely nominal rent. The ‘no network’ assumption disregarded only the purpose for which the operator’s rights were to be used, not the facts that the operator would be exercising those rights, and might inconvenience the landlord. The assumption required that the figures from other sites had otherwise to be revised downwards, so to strip out “so much as is attributable to the financial benefit accruing to the tenant from the intended use of the land”. But the rents at issue were such modest four-figure sums that only a little downward revision arrived at a rent below which a landlord would probably be unwilling to agree to the inconvenience of providing the site at all. Moreover, telecoms sites could tend to be more inconvenient, because of operators’ more frequent need for access than applies at small sites used for other purposes.

In conclusion the Tribunal was “persuaded that the … earlier figure of £750 was too low and should be reconsidered, not only because of inflation but in the light of the evidence of non-telecommunications transactions for unexceptional rural sites. That material, heavily adjusted though it necessarily is having regard to the artificial paragraph 24 hypothesis under which the valuation must be carried out, enables us to conclude that the appropriate annual consideration for a rural mast site is £1,750.”

Ancillary points to note from the judgment in landlords’ interests are that the ‘no-network’ assumption does not require disregarding the presence of any electricity and communications cables serving the site. Nor, more importantly, does it mean that an operator’s security of tenure is to be disregarded. But on the operators’ side of the scales, the Tribunal reiterated Dale Park’s treatment of evidence of payments offered by operators to landlords as incentives to enter into Code agreements as irrelevant, as following from the ‘no network’ assumption.

Does this mean that the ‘tariff’ rents for other types of sites should all be increased by 175 per cent? The answer to that is ‘not necessarily’. But Vache Farm could leave it open to combative landlords to try to achieve something similar, if they can adduce comparable evidence of actual rents for non-telecoms uses for small urban and suburban sites. Whether landlords will wish to do so will depend on their answer to the question on which the client has always far more expertise than any lawyer: whether it is a good use of their money. In Vache Farm the landlord achieved a rent which over the proposed ten-year term was in total £7,500 higher than the operator had been willing to concede. The hearing took two days. At a reasonable guess the costs of the hearing alone exceeded the stake.

Vache Farm has now been followed in Scotland. On 4 September, the Lands Tribunal issued its opinion in On Tower UK Ltd. v McLean, [2024] LTS 26, concerning a rural site on the respondents’ livestock farm, two hundred yards from the Aberdeenshire village of Maud.

The opinion contains a useful summary of Code decisions on rural rents. The Tribunal held that a Code rent is not to be fixed as a sum directly proportionate to the area of the subjects, by extrapolation from the ratio of rent to area in previous cases. It granted the operator of unlimited rights to share the use of the apparatus, including with non-Code operators (i.e., not licenced by Ofcom), on condition of identifying sharers to the landlords, but factored that in to the rent. The rent was also informed by the operator’s having the benefit of a break clause, and the prospect of upgrading work being undertaken over the term of the lease. Vache Farm’s £1,750 was taken as a starting-point, but given these specialities the annual rent was fixed at £2,000, subject to quinquennial review in line with the C.P.I. The Tribunal also added that:

“This decision draws upon Vache Farm as a comparator, which in turn draws upon analysis of rents of small compound sites south of the border, let for purposes other than Code rights. These suggest a ‘floor’ rent below which a site provider would be unlikely to treat. We have not heard evidence of such comparator sites north of the border. We shall keep an open mind in potentially reviewing our above decision in the event that such evidence is presented and analysed in a future case.”

The operator’s case for limiting the landlord’s statutory right to compensation for loss caused by the exercise of the Code rights was rejected.

Lease or licence

The Code refers simply to “agreements”; it is silent about whether the Tribunal can impose a lease, as opposed to a licence or a wayleave, but it has been held that it can: EE Ltd. v Islington LBC, [2019] UKUT 53. The Upper Tribunal’s judgment of 24 May in AP Wireless II (UK) Ltd. v On Tower UK Ltd., [2024] UKUT 263 (concerning sites at Burlington Gardens, Hockley, Essex, and Meadowley & Fields Farm, Sandbach, Cheshire) concerned whether an agreement was a lease or a licence. This may not matter in Scotland, but it did in this case because of the English Landlord and Tenant Act 1954, and some of what was said by Johnson J. could be relevant here.

Whether the agreements were leases depended on whether they granted the operator exclusive possession. Lord Templeman’s judgment that the nature of a contract depends on its substance rather than any label parties have chosen to give it is always worth quoting:-

“If the agreement satisfied all the requirements of a tenancy, then the agreement produced a tenancy and the parties cannot alter the effect of the agreement by insisting that they only created a licence. The manufacture of a five pronged implement for manual digging results in a fork even if the manufacturer, unfamiliar with the English language, insists that he intended to make and has made a spade.” – Street v Mountford, [1985] AC 809 (cf. Sherriff v O’Rourke, [2023] SAC (Civ) 18).

In the Hockley and Sandbach cases, Johnson J. found the agreements to be leases. Points of principle to be taken from his judgment are that Code agreements are not sui generis, but according to their content fall into one of the common-law categories of lease, licence or wayleave. A right to install equipment on land does not necessarily equate to exclusive possession. An obligation to enclose or secure the subjects tends to indicate exclusive possession, hence a lease. Not only a landlord’s right of access for inspection on prior notice, but to have the grantee re-locate his equipment, can be consistent with a lease.

In Scotland likewise, for a contract to be a lease, it has been thought necessary that it confers possession on the tenant exclusively. Admittedly that can prompt dispute about whether a contract is a lease where it gives the landlord some limited right to use the subjects, as with the reservation of the landlord’s right to accommodation for “two or three cows” on an apparently let farm in Cameron v Alexander, 2012 SLCR 50, or a reservation of the landlord’s right to take trout from fishings otherwise ostensibly let to a tenant in Devon Angling Association v Scottish Water, [2018] SAC Civ 7. Given the open-ended extent to which a landlord may reserve rights of use, the distinction between a lease and a licence seems to be one of degree: South Lanarkshire Council v Taylor, 2005 1 SC 182. Or perhaps exclusive possession is not a necessary badge of a lease at all: Gill, Agricultural Tenancies (4th edtn.), para. 5-08.

Johnson J.’s judgment also considered issues arising from the assignment of licences, which might be invoked in this jurisdiction, and English law’s need for a lease to have a definite ish. Here our law differs, giving effect to leases expressed to endure “as long as the grass groweth up and the water runneth down”: Carruthers v Irvine, 1717 Mor. 15195. But the issue seems unlikely to be important in the context of the Code, because its para. 11(1)(a) provides that to confer Code rights, an agreement “must state for how long the code right is exercisable”.