The New Electronic Communications Code

September 18, 2017

The new Digital Economy Act 2017 received royal assent on 27 April 2017 and introduces a revised Electronic Communications Code (“the New Code”) found in Schedule 1 of the Act. The Act and New Code apply to all of the United Kingdom but the intricacies of how and when it will be implemented have not been revealed.

The existing Electronic Communications Code (found in Schedule 2 of the Telecommunications Act 1984) has been long criticised for being inflexible and not adapting to the ongoing technological advances in telecommunications. The Government’s drive to provide high-quality networks to the entire country combined with businesses becoming more and more reliant on superfast broadband has reinforced the need to review the existing Electronic Communications Code. The New Code makes some significant changes to the existing legislation and grants considerably more rights for the telecommunications operator (“Operator”).

Some of the key provisions within the New Code are as follows:

a) Operators will not be restricted from assigning telecommunications leases, nor can conditions/restrictions be imposed in a telecommunications lease for such an assignment (except relating to a guarantee on an assignment) to another Operator.

b) Operators will have a right to share occupation of a site with other Operators but it is not clear if site providers can demand remuneration for this shared occupation under the terms of the telecommunications lease.

c) All New Code agreements will be outside the Landlord and Tenant 1954 Act (“1954 Act”), meaning it is likely they will be outside of the Northern Irish equivalent (Business Tenancies (Northern Ireland) Order 1996). The agreements will not benefit from New Code rights if the primary purpose (there is no definition of “primary purpose” so there is a clear potential for dispute here) of the lease/agreement is not to grant New Code rights, or it is a lease to which Part 2 of the 1954 Act (any tenancy where the property comprised in the tenancy is or includes premises which are occupied by the tenant and are so occupied for the purposes of a trade, profession or employment and includes any activity carried on by persons or a corporate entity) applies. It is proposed that there be a consequential amendment to section 43 (setting out exclusions) of the 1954 Act to provide that, where the primary purpose of the lease is to grant rights under the New Code, then automatically the 1954 Act will not apply to that tenancy. The New Code agreements cannot be governed by both the 1954 Act and the New Code. The New Code contains an alternative form of security of tenure benefiting operators. It is not entirely clear what affect the New Code will have on tenancies governed by the Business Tenancies (Northern Ireland) Order 1996 as there have been no details revealed to date specifically dealing with this legislation.

d) Operators will have a right to upgrade equipment installed/erected (but this is not an absolute right).

e) Telecommunications leases granted under the New Code will create overriding interests which bind subsequent owners of the land even where the leases have not been registered at the Land Registry. When acquiring land it will be paramount for the purchaser to carry out an in depth due diligence exercise of the site to ascertain if there is any active telecommunications arrangement at the site (this may not be so obvious at first glance of the site). In Northern Ireland it is only compulsory to register leases when they are for a term of 21 years or more. Telecommunication leases are traditionally for a shorter term than 21 years meaning there will be no discernible difference for sites within Northern Ireland.

f) Where an Operator and a site provider have not been able to agree terms for a telecommunications lease a court can impose the New Code on a site provider when the following tests have been satisfied:

i) financial compensation overcomes any prejudice caused to the site provider as a result of the installation/erection of the telecommunications equipment; and

ii) the wider public benefit is greater than the prejudice to the site provider.

g) The value of the land will be assessed on the basis of its value to the site provider, rather than the Operator (who will have installed/erected telecommunications equipment on the site).

h) To terminate a telecommunications lease, a site provider will have to give at least 18 months’ notice to terminate the New Code rights and the contractual term of the lease must have expired by the end of that 18 month period. The site provider must satisfy one of the following conditions before the court will order the lease to come to an end:

i) the lease should end as a result of a substantial breaches by the Operator of its obligations under the lease;

ii) the lease should end because of persistent delays in payments of rent;

iii) that the site provider intends to redevelop all or part of the land on which the telecommunications equipment is based and could not reasonably do so unless the lease comes to an end; or

iv) the Operator is not entitled to a New Code protected lease because there is no real public benefit and the compensation payable does not outweigh the prejudice to the site provider.

i) The New Code will only apply to leases/agreements entered into after it is enacted as law and will not apply retrospectively to existing telecommunications leases/arrangements.

The New Code has not immediately come into effect and the anticipated implementation date of July 2017 has now passed. We await confirmation on how and when the New Code will be introduced.

This article has been produced for general information purposes and further advice should be sought from a professional advisor.