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How will the new Digital Economy Act affect landowners?

With the new Digital Economy Act 2017 (“the Act”) having received Royal Ascent on 27 April 2017, Rhian Hawkins from Harrison Drury solicitors explores how this could affect landowners.

The Electronic Communications Code was originally brought into force to allow for the laying of telephone equipment and has been extended over time to regulate the relationship between all electronic communications, network operators and site providers in the UK. However, because of its complexities and due to significant technological advances, the government has introduced a new Telecommunications Code.

The provisions of the new code will apply to all occupancy agreements entered into between landowners and telecoms operators from the date the Act comes into force.   Whilst it is anticipated that the Act will shortly come into force, nothing has been confirmed at the time of writing.  The new code aims to promote long term investment in digital infrastructure, however, there are many significant changes that are likely to have an adverse impact on landowners, as set out below. 

Operators will have automatic access to land

Under the new code, telecoms operators will automatically be able to access land for the purposes of sharing or upgrading their apparatus without prior agreement having been obtained from landowners and without making payment of any additional consideration. This is provided there is minimal adverse impact of the appearance of the site and there is no additional burden on the landowner.

In light of this, landowners will need to ensure that all occupancy agreements entered into following the Act coming into force contain provisions for operators to provide notice of the sharing and/or upgrading of installations. This will enable landowners to be fully aware of who is in occupation of the land and also to be aware of the location and type of installations that run through the land. This knowledge will help to avoid any issues arising in terms of determining who the occupier is, should they wish to terminate the agreement, and seek to limit any adverse impact that this may have upon any future potential redevelopment of the land.

No limits for operator assignments

Further, any provisions included in occupancy agreements with telecoms operators that are intended to stop or limit operators from assigning the benefit of the same, or which seek to impose conditions on assignment, will be void. However, landowners should take some comfort in the fact that they are still afforded some protection and will be able to insist that the assigning party guarantees the performance of the obligations contained in the agreement on the part of the operator.

Strict contractual guidelines

It will not be possible for occupancy agreements to be contracted out of the provisions of the new code. For landowners, this means that they will not be able to seek to enter into occupancy agreements on terms more advantageous than those provided for by the new Code.

Land valuation and market value 

While the government are of the opinion that landowners should receive ‘fair value’ for telecoms operators using their land, they do not believe that landowners should benefit from the economic value of their land created by the public demand for the operator’s services. In light of this, the new code prescribes a new method of calculating the level of consideration to be paid to landowners on the grant of occupancy agreements. Upon the Act coming into force, land will be valued based on its worth to the landowner, not the operator. It is predicted that payments will fall in line with those made by utility providers and as such landowners should expect drastically reduced payments.

In anticipation of landowners seeking to withhold from making their land available to telecoms operators, the new code provides operators with a right to make an application to the court (if they have complied with certain pre-conditions) to impose occupancy agreements.

Terminating the agreement

Under the new code, landowners will only be permitted to terminate occupancy agreements on one or more of the following grounds:

  1. that there have been substantial breaches of the occupancy agreement by the operator;
  2. there have been persistent delays in payments falling due under the occupancy agreement being made by the operator;
  3. redevelopment; and/or
  4. where the test for imposition is not met (i.e. that the landowner can be adequately compensated in money and the public benefit outweighs the prejudice to the landowner).

Should a landowner wish to terminate an occupancy agreement entered into following the Act coming into force, they must serve 18 months written notice on the operator to terminate the agreement and even then, the agreement will only terminate provided that the operator has not taken the prescribed steps set out in the Act to challenge the notice.

Given that the notice period to terminate will be extended greatly, landowners who own sites that are earmarked for development and which are to become subject to occupancy agreements governed by the new code, should ensure that their redevelopment strategies are reviewed in line with the termination provisions set out by the new code.

On the flip side, many landowners will welcome the provision contained in the new code that the security of tenure provisions contained in the Landlord and Tenant Act 1954 (‘the 1954 Act’), which entitle a tenant to a new lease at the end of the term of the current lease except in certain limited circumstances, will not apply to occupancy agreements entered into following the Act coming into force, where the main purpose of the agreement is to confer rights under the new code. However, the new code is unlikely to be retrospective, so some landowners will still face difficulty in respect of existing leases which are not contracted out of the 1954 Act regime. Further, at this stage it is not particularly clear how the new code will apply to renewal leases and uncertainty will remain for landowners in this regard.

Advice to landowners

While landowners may feel that the proposed changes are unfair and imbalanced, it has been argued by some that the changes in the new code are not radical enough.  To protect their position before the new code comes into force, landowners should move quickly to ensure that all installations laid on their land are fully documented under occupancy agreements on favourable terms and which are contracted out of the security of tenure provisions contained in the 1954 Act. 

As always, it is essential that landowners seek specialist advice. Harrison Drury has a team offering advice on a full range of legal issues relating landowners. For more information please contact Rhian Hawkins on 01772 258 321.

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