Sending out the wrong signals


Developers at risk

For developers, telecoms has been one of those topics which everyone would prefer to avoid or pass over to a colleague.   It is an issue that comes fairly low down on everyone’s lists. However, there is a real risk for developers if they fail to give any attention to the proposed New Telecoms Code.

Under the current code, developers are in a fairly strong position when seeking removal of apparatus because of the potential compensation for loss of development value operators will have to pay in order to remain on site. This is usually enough to dissuade most operators from seeking to stay. The most difficult part is the timing of removal of apparatus.

On the face of it the New Code seems pretty favourable for developers. You may be told that as a developer, you do not have to worry about the New Code because it excludes code agreements from the security of tenure provisions of the Landlord and Tenant Act 1954, and also introduces development as a specific ground for terminating a code agreement.

However, don’t be fooled by the shiny wrapper. When examining the contents in more detail it becomes apparent that the New Code could have a significant effect upon developers.

The detail

Gone is the old compensation regime, replaced by compulsory purchase values which will not reflect the true diminution in value of land to a developer. Whilst the 1954 Act is excluded, the New Code itself continues agreements akin to the 1954 Act, save that a longer 18 month notice period is required and there are very limited grounds upon which you will be able to end a code agreement; realistically it will only be if you are developing. The New Code introduces new terms into agreements to allow unlimited rights to assign, share and upgrade equipment – with the consequential increase in contractors accessing buildings and no right to apply conditions or limitations, or to seek additional costs for this.

Additionally rent payable under any code agreement is likely to be considerably lower. The Department for Culture, Media and Sport (DCMS) gave a conservative estimate that the savings to the communications sector as a result of the New Code and other changes was likely to be in the region of £1 billion over 20 years. The inference is that the savings will come from landowners.

Potential problems for developers

So why does this matter to developers if they are able to remove operators and carry out their development?

Two situations where there are potential problems for developers are:

  • Before the development is completed and all units sold, an operator applies for an agreement to be imposed on the developer to install equipment on a rooftop in the middle of the new development. Installation of equipment on the rooftop would have a detrimental effect on the sales and value of the units, in respect of which, under the New Code, the developer would not be properly compensated.
  • The development of larger schemes where there is a need to provide mobile phone coverage over a site, as lack of coverage would be detrimental to sales.

In both situations, as a developer you are going to need to be in a position to negotiate a fair and reasonable agreement with operators in terms of access, equipment and costs. The New Code in its current form makes that difficult for developers.

The proposed New Code was released on Tuesday 5 July as part of the Digital Economy Bill and had its first reading in Parliament on Wednesday 6 July. The date for the second reading has not been released at the time of writing but rumours suggested that there was a push to have the second reading before Parliament’s summer recess. However, that seems less likely now. Whatever the timing, there is little opportunity to properly debate and make representations to DCMS regarding some of the significant issues which remain.

We encourage developers to engage in the debate for amendments to be made to the New Code in order to protect their interests.

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