A new ruling by the Scottish Lands Tribunal, which could have significant industry-wide ramifications, has re-opened the contentious issue of land ownership and rent reductions on UK mobile masts (inc. rooftop sites), such as those that may occur when mobile or wireless broadband operators attempt to renew an existing lease at a much lower rent.
Digital infrastructure builders and landowners rarely seem to see eye to eye. In the now distant past, it was often landowners that would extract highly lucrative rental agreements in return for allowing mobile and broadband operators to deploy infrastructure on their land (e.g. mobile masts, trenches for optical fibre etc.). This often made it too expensive for network operators to expand their coverage as much as they would have liked.
The government attempted to correct this in 2017 by revising the Electronic Communications Code (ECC) to make it easier and cheaper for operators to access public or private land (here). But that initially swung the problem in the other direction (here and here) and resulted in some providers, particularly mobile operators, trying to force the adoption of dramatically lower rents (sometimes slashing rents worth thousands to just a few tens of pounds).
Since then various tribunal rulings and wider political efforts have been made to find a greater balance, which has had some modest success (here and here), although experiences do vary. But the latest case, which centres on a proposal by On Tower UK Limited (OTUK) to renew an existing site lease – at a much-reduced rent – with the Church of Scotland, threatens to throw a new spanner into the works.
What’s the big deal?
Central to this case is the fact that the original tenant of the radio mast installation in Kay Park Parish Church in Kilmarnock was Orange PCS. But as so often happens in these cases as companies change over time (mergers, sales etc.), the lease was later assigned to EE and Three UK, before then being assigned to Arqiva, and finally to OTUK.
However, the lease is understood to have placed certain restrictions on any assignation and the landlord was not told of the assignation, thus the landlord appears to have objected when OTUK served notice to renew the lease on its standard terms at a rent of £3,000 (considerably lower than the contracted amount).
Normally it can be hard for landlords to successfully object to this kind of renewal, but the Scottish Lands Tribunal ultimately ruled (here) that OTUK was not a party to a Code agreement when it served the paragraph 33(1) notice to change the agreement. Put another way, the tribunal ruled the notice, and by extension the ensuing application, were both invalid.
Ian Thornton-Kemsley, Galbraith (land managers), said (BDC Magazine):
“Over the years operators have transferred sites between themselves apparently without properly considering the lease requirements; the case illustrates this. Despite the wording of the Code, operators are not prepared to justify the changes sought to the existing lease; and they readily apply to the Tribunals to impose agreements if landowners do not agree to their terms, which are often heavily weighted in their favour. This appears to have been the case at Kay Park.
It is important to check that the renewal notices are valid and to adhere to the requirements of the Code. By successfully challenging the basis of the notice, the landowner has protected its income for the time being – important to a charity such as the Church.”
Crucially, this may not be an isolated case, particularly when you consider that some 700 agreements were assigned from operators to Arqiva around 2015, which in 2019 went on to sell its telecoms infrastructure and related assets to Cellnex (c.7,400 cellular sites) and they later became OTUK. The deal also included a right to market a further 900 sites across the UK retained by Arqiva.
Quite how many of the related leases may have exactly the same problem is unclear, but it could potentially make life a bit more difficult for mobile operators that are seeking to renew leases and want to slash rents at the same time.