(Another!) telecoms tribunal ruling on terms and rent - Ewefields Farm (plus 13 others)

In another significant telecoms decision dated 5 August 2024, and following on from the Upper Tribunal (Lands Chamber) (“UT”) determination in “Vache Farm” less than a month ago, the First Tier Tribunal Property Chamber (“FTT”) has published a new decision (link below) dealing with a wide range of 140 terms in dispute, along with determining valuation matters, across 14 greenfield sites in a variety of locations and settings.

The case, referred to as “Ewefields Farm”, involved On Tower UK Limited (“OTUK”) (for whom Cellnex are the parent company) and AP Wireless II (UK) Limited (“APW”). These parties are no strangers, and have crossed swords multiple times across the various land tribunals and courts in telecoms disputes.

The Decision

With the body of the decision running to some 70 pages, and the appendix of disputed and determined terms a further 116 pages, the parties, and market, will need to take time to review and digest.

From the body of the decision itself, the below might be considered to be the key points of interest for greenfield landlords, but also site providers of any telecoms installation.

Sharing of apparatus, not land

Clarification on this point, originally considered by the UT in Audley House has been assisted by the more recent Product Security Telecommunications Act 2022 (“PSTI”), such that it is no longer necessary for operators to seek, or be granted rights, to share “land” which is demised. The Code allows operators and infrastructure providers to share apparatus/equipment only. This is important in the context of infrastructure providers, who mainly provide space on towers and within enclosures, which are excluded from the definition of “land”. As such, OTUK’s requested right to share “land” in addition to “apparatus” was rejected by the FTT.

Planning objections

Although APW’s request to include a clause preventing OTUK objecting to any planning applications that they submit was not included, it was noted that OTUK had previously made planning objections containing “erroneous statements as to planning law and policy”. Although “spoiler” objections by operators (or anyone) are not prevented by the RTPI or professional obligations, landlords who have a future desire to redevelop a site – or even land surrounding – should be conscious of the risk and operator tactics.

Redevelopment

The FTT adopted the approach taken by the UT in Vache Farm, in what appears to be emerging as a standard position for renewal sites, where the parties have agreed in principle to a renewal (rather than termination for redevelopment). That position is that the landlord should have a break, exercisable on or after the fifth year of the term. The landlord’s intent should be proven at the date of hearing, not the service of notice, or interim date, thus giving additional time to secure planning, funding, or other evidence to prove the termination ground.

Purpose of redevelopment

OTUK sought to limit APW to development only for residential purposes on 4 sites (proposing no break on the remainder). As per Vache Farm, the FTT found here that there was no justifiable reason for limiting APW’s development to exclude certain types of redevelopment. The Code was not drafted in this way, and such limitation would cut across the requirement for the court to impose terms that cause the least possible loss or damage to a site provider.

Lift & Shift

Although there were some technical aspects of the FTT declining to agree to a lift & shift clause due to conflict with exclusive possession, where the landlord’s surrounding ownership was limited, it was considered that there was no material benefit to either party on a small “shift”. Instead, the landlord should rely on their termination/break rights.

In our experience, “lift & shift” provisions have limited use or benefit in greenfield scenarios, and are better suited to rooftops where they are used for building maintenance, repair, and the “shift” is likely to be temporary to give effect to those repairs. As such, we prefer a “clean” break of an agreement in greenfield situations – the parties are free to negotiate on any replacement site, if they wish to.

Rent/consideration

The parties valuation experts approaches were significantly different, with OTUK simply proposing that all sites were “unexceptional rural sites” and as such, the figure derived from the 2020 decision in “Dale Park” for this type of site - ￡750pa – should apply. By the time of the hearing, OTUK had conceded that figure should be adjusted for inflation, but remained insistent that there was no reason to apply valuation opinion or judgement in respect of any material difference between the 14 sites.

By contrast, APW’s expert sought to apply an approach based on the location and setting of each site, along with what might be described as potential alternative use or “hope value” to insert additional lines of distinction into the existing Affinity Water table. For greenfield sites, the only established variations were the “unexceptional rural” and “rural adjacent to housing”. Although the market tends to be aware of, and have regard for the three sites comprising the “Audley House” case (within an office car park and industrial yard settings), this was never adopted into the Affinity Water table, as the parties’ experts agreed value in proceedings, rather than the UT determining it.

APW’s expert proposed a range of values and new “lines” to be inserted within the Affinity Water table to assist with greater variation and granularity for parties negotiating greenfield site agreements. The proposed categories were:

·???????? Remote Rural

·???????? Remote rural close to buildings

·???????? Urban Fringe

·???????? Commercial and Industrial

Much of the evidence considered by the FTT related to potential alternative uses of the land in question – and in a first for a telecoms case, expert planning evidence was presented by both parties as to whether a more valuable, realistic alternative use could emerge or be brought forward on a short, medium, or long-term basis.

Intrinsically linked to planning, were the potential demand and viability of such alternative uses, along with the timing. In a valuation context, this informed the “hope value” – a term often used in property development and valuation – and the FTT considered this in detail in arriving at their decision.

Ultimately, the FTT found that of the 14 sites, ten did not exceed the bar of what could be categorised as “unexceptional rural sites”. The FTT had been aware of the Vache Farm case, so it was inevitable that they should adopt the ￡1,750pa value from that case.

For the remaining sites, a semi-rural site adjacent to other uses (residential, equine, golf course) was determined at ￡2,000 per annum.

Although the FTT did not find the comparables for the setting of an “urban fringe” category persuasive, at Blackwell Grange, the hope value of this small parcel of amenity land merited a value of ￡2,000 per annum.

In a similar sense to Blackwell, Hollow Farm was determined to have an element of “hope value” – new development was being built out to the south, and the site abutted woodland to the north. This is a situation which we encounter quite regularly, and is no doubt set to further increase, with the new government’s aspirations to build out on green, and grey belt. Allowing for hope value, the FTT determined a rent of ￡2,500 per annum should apply here.

At the final site, Lubbards Lodge, the FTT were again persuaded that elements of hope value should apply, and determined the Code rent at ￡2,500 per annum. Although proposed by APW’s expert to fall in the “Commercial and Industrial” category, the FTT disagreed, but accepted that the property was in an unusual position, with varying adjacent land uses, from which hope value existed. The FTT described the location as “grey field”; a term which I think we will see adopted into the market, as helpful in summarising the characteristics and setting of many telecoms sites which sit outside of the “unexceptional rural” site category, but which also indicate the greater degree of hope value which often exists in these locations, and are advanced by time, government policy, or a landlord’s strategy in bringing any development to fruition.

In a final point on valuation, it was noted that APW’s valuer did not present adjustments for any identifiable burdens across the 14 sites. As such, the FTT did not consider assessment or adjustment to account for the “stage” two or three of the previously used Hanover approach. In my opinion, what might be concluded, is that where burdens on the landlord can be identified (as they were at Vache Farm – representing an adjustment of ￡750) and not “double-counted”, such upwards adjustments are justifiable and applicable.

As previously mentioned, the FTT imposed terms by addition of a column in the parties schedule of terms. On more detailed review, this will be informative as to each sides position at the hearing, but also what the FTT might decide if presented with the same or similar terms in the future. From a site provider’s perspective, the following terms imposed stand out.

Rent Review

Agreed by the parties as three-yearly, and to RPI. The FTT indicated in trial that they would have imposed in these terms, absent agreement.

Future Compensation

This is a significant decision by the FTT. On Tower argued that no contractual provision should be included; as these agreements were to be imposed, APW would benefit from access to the statutory compensation provisions.

In the market, and in our experience, a contractual compensation clause is insisted on by our advised clients in any “consensual” deal. Where this is refused by the operator, or where a heavily caveated, conditional and “non-negotiable” clause is put forward by operators (as is the case with OTUK), the site provider can only be protected by having the agreement ordered by the tribunal.

It is clear that this is not an efficient use of the tribunal’s time; in effect, “rubber stamping” an agreement to provide the site provider’s entitlement to future compensation, in what could easily be replicated contractually. This seems to clear the way for APW’s wording (adopted by the FTT) to be inserted into all Code agreements going forward.

Permitted Use

Whilst this might seem a benign point, the FTT agreed that OTUK’s use should be for Electronic Communications only. This did not extend to exploiting opportunities and revenue associated with EV charging, and other energy storage, which is not for their statutory purpose (and for which the landlord is prevented from a share in the economic benefits).

Given the decision and appendix runs to nearly 200 pages, the above represents only a summary of the key outcomes and issues on first reading. There has been no public comment by operators on the four other decisions from the UT, FTT and Scottish Lands Tribunal determined in the last few weeks, so it remains to be seen how this latest decision is received and debated in the market, which, of course, Carter Jonas will be an active participant.

Carter Jonas Telecoms

Carter Jonas is a multi-disciplinary property consultancy, with offices across the UK and over 800 professionals across Infrastructure, Rural, Commercial, Planning & Development and Residential divisions.

Our Telecoms team is highly regarded and recognised across this specialist sector, with a small, dedicated team of professionals having on average 20 years’ experience across the market. We act for public sector, private client, investment and development clients on a range of transactional, strategic and complex matters where an in-depth, and multi-discipline approach is essential.

The team is led by Paul Williams, who has been involved in the market since 2001, originally acting for and within operator property departments, before joining Carter Jonas in 2018. He was instructed as expert valuation witness and gave evidence to the Upper Tribunal in both “Audley House” and most recently “Vache Farm” where consideration/rent were key areas of dispute. He is also a technical author for RICS on telecoms infrastructure and valuation, and sits as a steering group member of the National Connectivity Alliance (NCA).

#telecoms #valuation #code #ewefields

Link to decision