Operators 1 – Landowners 0

Although the updated Electronic Communications Code (‘the Code’) was only enacted in 2018, it has generated a huge amount of case law in a short space of time. In essence, it’s provided private telecoms companies with much greater access to land and enabled them to continue to expand mobile networks. For landlords however, this has caused significant monetary ramifications and the latest appeal appears to have strengthened the position of telecoms companies, potentially leaving landowners having to accept reduced rentals.

Earlier this year the Inner House of the Court of Session issued its first appeal judgement on the Code which will have lasting consequences for many landowners. The case, EE Ltd and Hutchison 3G v Duncan, centred around the rights of a telecommunications operator (‘operator’) to modify an existing agreement under Part 5 of the Code. Part 5 permits an operator, in certain circumstances, to terminate an existing agreement and replace it with a new Code Agreement, which would be commercially beneficial to the operator.

Original decision by Scottish Lands Tribunal

The original decision by the Scottish Lands Tribunal (‘the Tribunal’) concerned a lease which had expired in 2012 but was continuing from year to year due to neither party issuing a notice to terminate (known in Scotland as tacit relocation).

The operator sought an agreement from the landowner for a new lease containing provisions designed to update the existing lease and bring it in line with the new code. The updated agreement included financial provisions which were more favourable to the operator. The landowner refused to accept the terms of the updated agreement which led to the operator applying to the Tribunal for an order imposing the new terms on the landowner.

The Tribunal held that while the lease was continuing on tacit relocation, an operator could apply for the agreement to be modified in line with the new Code. However, in doing so, the Tribunal set a high bar and provided that such an agreement would only be imposed where an operator could show a clear “business and technical need” for a new agreement. It wasn’t enough that the new agreement was simply on better financial terms for the operator. The operators failed to show that the new agreement was required for business or technical efficacy or to improve customer service and so the Tribunal refused to impose the terms of the new agreement.

Appeal decision

The operator appealed the decision.  The Inner House of the Court of Session ruled that the Tribunal set the bar too high; the new Code provided a basis for which an agreement could be imposed and therefore it should be no different when modifying an existing agreement. As such, an operator need only show that the existing agreement “is out of step with the minimum rights under the new code”, rather than having to show that the previous agreement was unduly onerous and restrictive.

What this means for landowners

Many landowners will have been minded to leave their existing leases running on tacit relocation, allowing them to continue to benefit from a higher rental income, and in many cases, a site sharing fee. However, it’s highly likely we will now see operators moving forward to terminate existing agreements and replace them with new code agreements. Unfortunately it appears landowners will have to accept a significantly reduced rental income based on the new Code, or be under threat that the operator will apply to the Lands Tribunal for a Code Agreement to be imposed.

What you can do

If you find yourself in a similar situation to the landowner in the case discussed above, we recommend seeking professional advice as early as possible. If you have any questions relating to the Code please do not hesitate to get in touch with myself or another member of our Rural Land and Business team.

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