Press release

Rural telecommunication rents increase

due to key legal ruling

2 August 2024

A key legal ruling has opened the door to a significant rise in rent paid to landowners by telecom operators for siting masts on their property. TheVache Farmcase in the Upper Tribunalalso confirmed that it would be appropriate to increase any rents set in previous Tribunal decisions by the inflation rate from the date they were determined.

The case of EE Ltd & H3G Ltd v AP Wireless Ltd in respect of renewal of a radio mast site atVache Farmin Buckinghamshire set a rent of £1,750/annum, using comparable transactions for rents forunexceptional rural sites- the Tribunal had previously determined a rent of £750/annum for this type of site.

TheUpper Tribunal foundthere is a rental level below which no prudent and willing landlord would transact for any small parcel of land and they then added the additional burdens of an agreement under the Electronic Communications Code to award a rent of £1,750/annum-well above the inflationary increase on their previous decisions.

In2020, faced with a plethora of cases and competing arguments, the Upper Tribunal departed from the general approach by courts and tribunals to prefer market evidence, taking the view that comparable evidence was unhelpful.The Tribunal placed reliance on previous awards asdirectevidence of value and produced a table of rents in the Affinity Water case.This has led operators to propose £750/annum at lease renewal for many rural sites but with consensual agreements being generally agreed above these levels.

Ian Thornton-Kemsley, a telecoms industry valuation expert at Galbraith, said: "InVache Farmthe Tribunal acknowledgedthat alternative use values had been previously put before it and generally had not been taken into account in determining valuations under the Code. The Tribunal noted that inVachean attempt was made to analyse such transactions with a view to establishing "a tonal value for small rural sites in non-telecommunications use which may then be used to arrive at[a Code valuation]" - an approach originally raised by me inCTIL

-v- Compton Beauchamp. InVacheit wasaccepted there needs to be a level of adjustment from a "passive" infrastructure use to account for the real burdens of telecoms. Among other burdens the Code imposes a considerable degree of security of tenure and requires a minimum termination notice of 18 months on the part of a landlord provided they have an eligible reason for ending the agreement. This latest decision has effectively set a new base rent figure for an "unexceptional rural sites. This decision does not take into account of any burden or impact suffered by the landlord outside the immediate vicinity of the radio mast site so rents will be higher than this where additional impact is caused by the rights granted."

Mike Reid, Head of Utilities and a telecoms specialist at Galbraith, added: "Over the last few years landlords, including charities and sports clubs where the income from telecommunication sites is important for their finances, who were forced to accept lower rents at renewal as a consequence of threats of legal action and who have no recourse to open market rent reviews, will rightly now feel aggrieved that their rents are fixed below this level."

Given this decision for a rural radio mast rent it would seem difficult for valuers acting for the operators to continue to maintain that an unadjusted "Affinity Water table" applies. The decision is in line with the Royal Institution of Chartered Surveyors in its Guidance NoteSurveyors advising in respect of the Electronic Communications Codewhich states:-

Although the valuer will be required to abide by the constraints of the statute, the principles of comparable evidence will still apply and the valuer will need to search for and analyse evidence in the usual way.

Being able to adjust the previous decisions for inflation is also an important decision and this would give rise to the following amended Affinity Water table:-

Whereas theDale ParkandFothringhamrents will be superseded by theVache Farmdecision, which is now above these levels, the impact of adding an inflationary increase significantly increases some of the rental levels previously awarded.

Operators will usually want to enter into consensual agreements and it is important to bear in mind that the award of £1,750/annum is an imposed value ordered by the Tribunal and includes a statutory entitlement to compensation. Consensual agreements should from now on be agreed at or above these levels and the terms of the agreement are also important to future proof any agreement to protect the landlord's position.

Mike Reid added: "Prior to the Vache Farm decision many landlords will have received lease renewal approaches from operators at rental levels below the £1,750/annum figure so they need to review the rent that should be paid for their sites and the terms of the lease following this decision and I would urge them to seek proper professional advice for any negotiation."

The rapidly moving "market" in respect of electronic communications more than ever requires specialist advice and all reasonable fees should be paid by the operators for landlords who progress a code agreement.

Read the latest on energy, renewable energy, utility, telecoms and rural affairs in the latest issue of Galbraith'sEnergy Matters.

The Vache Farm Upper Tribunal decision can be found at -LC-2020-55 final_.pdf (tribunals.gov.uk). 

Further information:

Galbraith

Ian is recognised as one of the leading specialists in the UK in the valuation of telecommunications rights over property.

He has appeared as a valuation expert in several lease renewals for telecommunications sites under the Landlord & Tenant Act 1954. He has acted in a number of cases under both the 2003 and 2017 Electronic Communications Code on fibre and mobile telephone sites (both greenfield and rooftop). He was the arbitrator in the Bridgewater Canal case.

He has given expert valuation advice in many of the leading cases under the new Code including:-

•                 CTIL -v- University of London
•                 EE & H3G -v- Meyrick
•                 CTIL -v- Compton Beauchamp
•                 CTIL -v- Fothringham
•                 EE & H3G -v- Pippingford Estate

Photo of Ian:Ian Thornton-Kemsley

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About Galbraith

Galbraith is an independent property consultancy employing 240 staff in offices in Scotland and the North of England including Aberdeen, Ayr, Blagdon, Castle Douglas, Cupar, Edinburgh, Galashiels, Hexham, Inverness, Kelso, Morpeth, Penrith, Perth and Stirling, offering local knowledge, national expertise and international reach.

The firm provides the full range of property consultancy services across the commercial, residential, rural, renewable energy, utility and infrastructure sectors. Galbraith is the largest and leading rural consultancy in Scotland and the North of England, managing farm, forestry, land and estate interests on over 3.5 million acres.