First ruling on consideration under the new electronic communications code

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First ruling on consideration under the new electronic communications code

First ruling on consideration under the new electronic communications code

The latest hearing before the Upper Tribunal (Lands Chamber) in EE Limited and Hutchison 3G Limited v The Mayor and Burgesses of the London Borough of Islington has provided the first guidance from the court on the issue of consideration determined under the provisions of the new Electronic Communications Code (the “Code”).

The decision dealt with more than just consideration, but I will focus solely on that element in this article. When imposing an agreement under the Code for a site located on the roof of a block of flats in Islington, the court had to consider what consideration should be payable by the operators when the principles set out in Paragraph 24 of the Code are applied. Under Paragraph 24 consideration is to be assessed on a “no scheme” basis. The value to the operator of the land as a location for it to operate its network is to be disregarded. The implications of this have been debated fervently within the industry, but until now no precedent had been set in the court.

In determining the consideration to be paid under the agreement for this rooftop site, the court accepted that “there is no demand for such space for any commercial purpose unconnected to telecommunications”, but did not accept that there should therefore be only a nominal consideration. The court considered that the presence of the operators on the roof would have an impact on the site provider’s use of the building and that “the risks and obligations which the relationship creates for the site provider must be taken into account”.

The court gave consideration to the fact that residential tenants in the building would pay an annual service charge towards the running and upkeep of the building, whereas the operators would not. In order to redress the balance there, the court worked out what would be a fair equivalent for the operators to pay each year as part of the consideration under the agreement. This took into account the items within the service charge which the operators would benefit from (e.g. building insurance, caretaking and management) and decided that those items account for more than 70% of the total contribution of the leaseholders in the building (which averaged about £1300 per flat each year). The court also determined that the presence of the operators on the rooftop warranted a higher contribution to the cost of roof repairs (which averaged about £36 per flat each year).

The conclusion that the court reached was that the nominal value of the rights themselves on a “no scheme” basis was £50 per annum. Taking into account the contribution that the operators should be expected to make equivalent to a service charge, the court arrived at a total consideration of £1000 per annum.

It should be noted that the consideration set by the court in this case was in fact £2551.77, but this was only because the operators had put forward this amount at the previous hearing. Were that not the case, it is probably fair to assume that the court would have set the consideration at £1000.

What does this tell us about how consideration is to be determined under the Code?

It seems that there are two elements when determining the consideration: (1) The nominal value of the right to have apparatus on the land; and (2) The consideration due to the site provider in respect of the risks and obligations imposed.

It is important to note that this case deals with a rooftop site, and that the risks and obligations for the site provider would be considerably different where the site is on the ground (a “greenfield” site). If a site is located, for example, in a farmer’s field there is no building insurance and there are no roof repair costs to take into account. On the face of it, there may be very little (if any) consideration due in respect of the risks and obligations imposed on the site provider. Could that mean that only a nominal consideration nearer the £50 mark is set?

While this first ruling provides important guidance, in particular for rooftop sites, it leaves the question of what will be decided when the issue of consideration for a “greenfield” site comes before the court. We will have to wait and see.

For more information on this article, you can contact Graham Jones or you can give us a call on 0345 070 6000.