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The New Electronic Communications Code

  • United Kingdom
  • Diversified industrials

09-01-2018

The new Electronic Communications Code (“the New Code”) received royal assent on 27 April 2017, as part of the Digital Economy Act 2017 (“the Act”). The New Code came into force on 28 December 2017.

The New Code is contained at Schedule 1 of the Act and introduces a new Schedule 3A to the Communications Act 2003. It replaces the previous version of the code set out in Schedule 2 to the Telecommunications Act 1984 (“the Old Code”).

The New Code will have a significant impact on the relationship between landowners/occupiers and ‘operators’ (the licensed providers of electronic communications services) and agreements relating to telecoms apparatus on land or buildings throughout the United Kingdom.

The New Code is intended to clarify the law, give operators clearer rights, greater flexibility in enjoying those rights and is intended to facilitate the sharing of network apparatus.

It is fair to say that the new provisions strongly advantage the operators as opposed to the landowners.

What is the Electronic Communications Code?

The code regulates the legal relationships between landowners and certain network operators.

It gives rights to the providers of these networks to install and maintain apparatus in, over and under land. These are known as code rights.

Those code rights apply to the physical equipment that support the operators network which comes in a variety of forms: fibre optic cables, equipment cabinets, mobile phone antennae and masts, to name only a few.

Why is there a new Code?

Growth in the mobile industry has been dramatic by virtually any measure with enormous investment in network expansion and upgrades in recent years. Demand for data usage and consumer demand for digital technologies continues to grow. The ability of operators to easily upgrade apparatus and infrastructure to reflect changes in technology has been a major factor influencing the reforms. The Government wanted to reform the Old Code to put in place modern regulation which fully supported the rollout of digital communications infrastructure.

The Old Code was also in desperate need of reform due to it being outdated, complex and difficult to apply (having also previously been described judicially as…”one of the least coherent and thought-through pieces of legislation on the statute book…”). The real problem for landowners and occupiers has been in recovering possession of land occupied by an operator and in the interface between the Code and the separate form of security of tenure under the Landlord & Tenant Act 1954. The two conflict and simply do not fit together. The Code also lacked clarity around how to assess the level of payments for the grant of rights, enforcing the termination of those rights and a swift and effective route to resolving disputes.

Clarifications under the new Code

Interaction with the Landlord & Tenant Act 1954

The New Code provides some much needed clarity regarding the interaction between the code and the 1954 Act. The security of tenure provisions under the 1954 Act will not apply to any agreement between a landowner/occupier and an operator where the primary purpose is to grant code rights. There is of course room for doubt and dispute as to the “primary purpose” of a lease, but in most cases it should be clear cut.

The New Code will therefore remove the “double whammy” of providing operators with the dual protection of security of tenure provisions under both the code and the 1954 Act.

The reforms mean the operator will only benefit from one form of security of tenure, addressing both the consensus that dual protection is unnecessary and the incompatibility between the two regimes.

Formalities

The New Code requires a greater degree of formality to any arrangements between landowner/occupier and operator. Any agreement must now be in writing and signed by or on behalf of landowner/occupier and operator, and must state its duration and any notice period. Hopefully this will result in fewer “inadvertent” agreements being entered into by landowners/occupiers with long term ramifications and more far-reaching and durable rights than anticipated by the owner or occupier of the land.

In certain circumstances the New Code requires operators, landowners/occupiers and other parties to provide notice to one another. Those notices must be given in the form prescribed by Ofcom to be valid.

Registration

It is now completely clear that an agreement under the New Code will not have to be registered at HM Land Registry, or otherwise, to be binding on third parties. This will be the case even if the agreement is in the form of a lease. So inspection and investigation and enquiry will be essential when dealing with land that has telecoms equipment present on it

New rights for the operators

An automatic right for operators to assign Code agreements

Any provision in a code agreement will be void to the extent that it purports to prevent or limit the assignment of the agreement to another operator, or make such an assignment subject to the fulfilment of conditions. The only exception to this is that a code agreement can still require that the outgoing operator guarantee the incoming operator’s performance of the code agreement. This guarantee can only extend to the immediate incoming operator, just like an authorised guarantee agreement under the Landlord and Tenant (Covenants) Act 1995.

An automatic right for operators to upgrade or share apparatus

If the two conditions set out below can both be satisfied, an operator will be able to upgrade apparatus and share its use with another operator, notwithstanding any term of the code agreement:

(1) the upgrade or sharing of apparatus should have no adverse impact, or more than a minimal adverse impact, on the appearance of the apparatus; 

(2) the upgrade or sharing of apparatus should not impose any additional burden on the landowner;

(3) an additional burden includes agreeing that

(i) has an additional adverse effect on the other party's enjoyment of the land; or

(ii) causes additional loss, damage or expense to that party.

The automatic right to share includes the right to carry out works to enable the sharing. How those concepts are to be judged and tested is likely to be quite difficult in practice.

“No scheme valuation”

The New Code will make major changes to the way land is valued. In circumstances where a code agreement is imposed upon a landowner/occupier or where the court is required to specify terms where the parties are unable to agree (for instance in relation to seeking a modification of the terms where the parties are unable to agree (for instance in relation to seeking a modification of the terms to an existing agreement or agreeing terms to an agreement) valuation of the compensation will be on the basis of market value – adopting the wording and definitions used in the “Red Book” – RICS valuation standards, modified to include certain assumptions.

It will be valued on a “no scheme” basis based on compulsory purchase principles – rights valued on the basis of their value to the landowner rather than on the basis of the value to the operator and tied to future use as a telecoms site.

This could make a substantial financial difference. Rents will, in effect, be regulated and we expect that this approach will favour operators.

Termination & removal under the new Code

One of the most important and contentious areas under the Old Code was the provisions concerning the removal of apparatus. There are new provisions governing how a code agreement can be brought to an end and apparatus then removed.

It isn’t a one stop shop. There is a two stage process under which an Order ending the relationship does not give an instant right to possession. There is a separate process to follow for removing apparatus.

Part 1 of this process requires a landowner/occupier to first give notice to the operator citing the grounds on which the Code agreement should come to an end and the end date. At least 18 months’ notice is required. The new Code sets out four grounds upon which the site provider can rely (which closely mirror the grounds under section 30(1) of the Landlord and Tenant Act 1954) and include substantial breaches of the agreement by the operator, persistent delay in paying rent and an intention to redevelop by the landowner.

Upon receipt of the notice the operator then has three months (as opposed to 28 days) to give counter-notice stating that (i) the operator does not want the agreement to come to an end, (ii) that the operator wants the site provider to confer/be bound by the existing Code rights on new terms, or, new Code rights. If no Counter Notice the agreement comes to an end.

Within three months of the date of the counter-notice the operator must apply to the Court for one of a series of orders that can be granted. If the landowner/occupier makes out its ground of opposition then the Court can order the Code agreement is at an end.

Part 2 of the process relates to removal. Having secure the right to require the removal of apparatus a landowner/occupier must then give notice to the operator requiring removal of the apparatus and the making good of the land within a reasonable period of time. Ultimately an occupier/landowner can then make a series of applications to the Court for an order which requires the removal of the apparatus and the restoration of the land or permits the occupier/landowner to remove/sell the apparatus.

Dispute Resolution

In order to ensure more effective and speedier dispute resolution the forum for almost all disputes under the Code will be the Lands Chamber of the Upper Tribunal. There will be a move away from the ordinary Court system to provide swift adjudication for this sort of dispute given the time, expense and delay involved in securing determination through the Courts.

Impact On Existing Agreements

An obvious question for many landowners and operators is how the New Code will affect subsisting agreements entered into prior to the New Code coming into force.

The reforms, as a whole, will not have retrospective effect. The New Code sets out transitional provisions. Those provisions apply the New Code to subsisting agreements, but subject to modifications:

  • the new automatic rights to assign, upgrade and share do not apply. If a subsisting agreement does not allow assignment, upgrading or sharing, there remains no right to do so;
  • persons bound by subsisting agreements under the Old Code remain bound;
  • under the New Code, the reference to a “code right” is more extensive. The transitional provisions provide that a more limited range of code rights apply to subsisting agreements rather than the wider range of rights under the New Code;
  • alterations are made to the new provisions relating to the termination and modification of agreements. The provisions are not straightforward and easy to follow:
    • the starting point is that the new termination provisions in Part 5 of the New Code will apply;
    • however, under the transitional provisions those new termination provisions will not apply if either (i) the relevant code agreement is a lease to which Part 2 of the 1954 Act (i.e. the security of tenure provisions) applies (and there is no agreement to contract-out of the 1954 Act); or (ii) the code agreement is a lease whose ‘primary purpose’ is not to grant code rights and the lease is contracted-out of the 1954 Act;
    • where the ‘primary purpose’ of the code agreement is to grant code rights and the 1954 Act does not apply to it, then the termination procedure in Part 5 of the New Code will apply but subject to certain modifications. For example, where the unexpired term of a subsisting agreement as at 28 December 2017 is less than 18 months then the period of notice to be given to bring a code agreement to an end is modified from 18 months’ notice to a period equal to the unexpired term or 3 months, whichever is the greater;
    • the transitional provisions do not modify the application of Part 6 of the New Code, the provisions regarding enforcing the right to require the removal of apparatus or the restoration of land. Subsisting agreements will therefore be subject to these new provisions.

The Old Code is replaced, but in limited circumstances its provisions may still apply where the installation of apparatus was completed or certain notices given or applications to the Court had been made prior to the New Code coming into force. Accordingly, by way of example, paragraph 20 of the Old Code (the right to require relocation or alteration of apparatus) remains applicable in relation to apparatus that had been installed by 28 December 2017.

Looking forward

Under the New Code Ofcom was required to:

  1. prescribe the form of notice to be given under each provision of the New Code that requires a notice to be given;
  2. prepare and publish a Code of Practice; and
  3. prepare and publish standard terms which may be used in agreements under the New Code.

Ofcom has published the final versions of these documents to coincide with the entry into force of the New Code.

There will be the inevitable period of uncertainty as the New Code settles down into practice and is applied in the real world. Ofcom is likely to take stock after an appropriate period of time to consider the effectiveness of the Code of Practice, notices and standard terms and invite further consultation. These are likely to be subject to further refinement to take account of experience of using the documents in practice as a result.

For more information contact

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