Telecom leases – an additional source of income but at what cost?

Due to their nature, this makes fire stations, hospital buildings and tower accommodation highly desirable locations for the installation of telecommunication equipment. However, whilst the commercial attractiveness of an additional income stream is obvious, potential landlords should take care when entering into agreements without fully appreciating the consequences.

One of the main concerns for landlords when entering into telecommunication agreements is whether they will be able to recover the land during the term or when the agreement expires.

The Electronic Communication Code

The Electronic Communication Code (the “Code”), introduced by the Telecommunication Act 1984 (as amended by Schedule 3 to the Communications Act 2003) (the “Act”), imposes a form of statutory protection which can make it difficult for landlords to require, during or on the expiry of a term, the removal of any telecommunication equipment unless the tenant agrees.

In addition, the tenant might also benefit from protection under Part II of the Landlord and Tenant Act 1954 (the “LTA 1954”). Whilst many landlords are awake to the potential benefits of contracting out of the LTA 1954, they fail to take into account the additional protection offered by the Code.

Paragraphs 20 and 21 of the Code provide a form of security of tenure, which operates in addition to the security of tenure provisions of the LTA 1954, and limits the circumstances that will enable a landlord to seek to regain possession.

Unlike the LTA 1954, there are no special procedures allowing parties to contract out of paragraphs 20 and 21. The lack of a specific procedure causes ambiguity and in fact the Code specifies that attempts to contract out of paragraph 21 will be ineffective.

Paragraph 20 applies where a person with an interest in the land requires alteration (which includes moving, removing and replacing) of the telecommunications equipment to enable proposed improvement of the land. Whereby paragraph 21 applies where a person is entitled to require the removal of any of the operator’s equipment i.e the term of the agreement has expired, forfeiture, lift and shift provisions etc.

Both paragraphs 20 and 21 of the Code contain detailed provisions for service of notices and counter notices. Care should be taken in serving these notices as technical issues can arise as to which is the appropriate notice to serve.

Our View

Landlords who are either considering becoming, or are already, party to telecommunication agreements need to assess and fully appreciate their position. Whilst it is possible to mitigate risk, landlords need to appreciate that regaining possession of land is far from straight forward.

Consideration needs to be given when negotiating the terms of these agreements as to the benefits of contracting out of the LTA 1954 and also the wording of any clauses that seek to exclude or limit the provisions of the Code as not all exclusions clauses will be valid. The wording and scope of the exclusion clause will be key!

If landowners are currently reviewing their agreements with the view to seeking vacant possession, care needs to be taken to ensure the correct notice is given and that consideration is given to the fact that a landowner may have to resort to Court proceedings to recover possession. If the agreement also benefits from security under the LTA 1954, this will create another level of complexity that will require careful consideration and management.

If you would like to discuss how your organisation currently deals with telecommunication agreement or related issues, please contact Cynyr Rhys on 0121 214 3619 or cynyr.rhys@anthonycollins.com

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