An overview of key points around access agreements between property owners and network operators for the deployment of digital infrastructure.
What is an access agreement?
If a communications network provider needs to use another party’s land in order to install, operate or maintain a digital communications network or system of infrastructure, they must obtain the other party’s agreement to do this.
The government recognises the importance of digital communications networks for the United Kingdom’s social and economic well-being. As a consequence, agreements between site providers and communications network providers take place against a specific legislative framework that aims to support digital communications deployment.
The legislative framework
The following guidance sets out best practice when negotiating and formalising agreements. Local authorities should refer to this page for advice ways to encourage and engage with requests from industry.
Agreements that give communications network operators rights to access private and public land and buildings for network installation and maintenance are regulated by the Electronic Communications Code (the Code). Refer to the section on legislation and regulation for further information. This guidance sets out best practice principles that DCMS recommends Local Authorities should be aware of when providing communications network operators with rights to access their land and assets, to ensure consistency with the legislative framework and Government policy.
The overarching aim of these principles is to help Local Authorities provide access to operators in ways that maximise the use of public sector land, buildings and other assets for providing UK consumers with high quality digital coverage and connectivity.
Forms of agreement
In order for a network provider to successfully connect a home, a business or a school with telecommunications infrastructure, they must obtain the right to do so from a landlord by signing an access agreement. Access agreements may take different forms, which will often depend on the right being sought.
The most common forms of agreement in digital communications deployment are wayleaves and leases.
A wayleave is a contractual agreement between a landowner or landlord and a telecommunications provider, where the landowner grants the network provider a licence with the right to access land and/or property, to install and/or maintain electronic communications apparatus. Wayleaves are commonly used for the deployment of fixed-line broadband infrastructure.
A lease is a contractual agreement in which the owner of property grants a right to use the property for a specified period of time in return for specific periodic payments. Lease agreements are more common for mobile masts on land or rooftops.
In the case of a wayleave, the grantor of the wayleave receives a payment, either annually or one-off, and is commonly open-ended. The rights may include occupation but may simply be limited to rights to pass a cable or a fixed line on, under or over the land (and may not be precise as to the location).
A lease agreement is usually for a fixed period of time and confers occupational rights to a specific area of land or a building. For this reason, wayleaves are commonly used for the deployment of fixed-line broadband infrastructure, whereas lease agreements are more common for mobile masts on land or rooftops.
The difference between these forms of agreement had particular importance in the past, because the relevant form determined whether any subsequent purchaser of the land would be ‘bound’ (required to uphold) rights granted under the agreement and what Land Registry requirements applied. The Code reforms introduced in 2017 dealt with this issue. Regardless of form of code agreement (wayleave or easement), a successors in title (subsequent owners or purchasers) remain bound to code rights previously agreed.
It remains useful for local authorities to be aware of the different forms that an access agreement can take. However, in all cases, the key issues to consider when negotiating an access agreement are:
- what rights the network provider wants or needs to successfully install, maintain or operate their network
- whether the local authority is able to grant these rights
- what the appropriate terms should be
What does a good agreement look like?
An effective agreement will:
- be made in writing
- record the terms agreed between the parties
- help ensure the rights and interests of all parties are protected for the duration of the agreement
- include a mechanism to prevent and resolve disputes or misunderstandings
Agreements will vary, depending on the rights being sought and the terms agreed. However, there are a number of available sources that local authorities may find useful when considering what to include in their own agreements. These include:
Ofcom guidance on the Electronic Communications Code
This may be useful when negotiating an agreement granting Code rights. The guidance includes:
Standard terms (template agreement)
Template notices. This is an overview of appropriate legal terms for various actions around the code agreement.
Digital Infrastructure Toolkit
A template access agreement that has been developed for granting rights to use central government sites. This toolkit could also be useful for local authority solutions.
The City of London standardised wayleave
Of these model agreements, only the Digital Infrastructure Toolkit and accompanying documents have been developed by central government. The others are not endorsed by central government, but they may be useful starting points depending on the context and nature of the agreement being sought.
Greater London Authority template agreement
The Mayor of London engaged the British Standards Institution to work with a steering group made up of representatives of Transport for London, London local authorities, Cabinet Office, landlords, RICS, British Property Federation, network operators and their partnerships to develop consensus-driven impartial documents and accompanying guidance.
This project was inspired by the success of the City of London’s Standardised Wayleave Toolkit and the City of London kindly supported the development of these documents.
The Draft Documents and Guidance Note are provided free of charge on the Greater London Authority website and are intended for use by legal representatives of mobile network operators and their site providers, in London and beyond.
The use of these documents is voluntary. They can be adapted and are intended to provide a recognised neutral starting point for discussions, promoting common understandings of key issues for discussion.
When agreeing individual terms, local authorities should carefully consider what the communications network provider needs to install and maintain their apparatus or network and have regard to the importance that the Government attaches to digital infrastructure deployment and the social and economic benefits that it delivers.
Agreeing financial terms - background
As with any other term of an agreement to host digital communications infrastructure, financial terms should be agreed, wherever possible, on a consensual basis between the parties. However – as with other terms – it is important to note that these agreements are underpinned by a statutory framework (the Electronic Communications Code – “the Code” - as set out in the Communications Act 2003, amended by the Digital Economy Act 2017).
Amongst other things, the Code sets out how a court should determine the financial terms for rights under the Code (where these cannot be reached on a voluntary basis and the court considers it appropriate for an agreement to be imposed).
Government Departments, other public bodies, valuation experts and legal advisers should note the Government’s clear hope and expectation that these reforms will lead to significant reductions in the amounts paid for rights to install and maintain digital communications infrastructure. The Regulatory Impact Assessment, which was published with the Digital Economy Act 2017, provides further information about this.
The Government also encourages departments, other public sector bodies and their valuation experts and legal advisers to familiarise themselves with this statutory framework, particularly when negotiating the financial terms of an agreement.
The Code provides for two forms of remuneration: Consideration and Compensation. Departments, public sector bodies and their valuation experts and legal advisers are encouraged to familiarise themselves with the legislative framework and relevant Tribunal determinations when negotiating financial terms.
Consideration and compensation
The Code makes separate provisions for both consideration and compensation and the balance of consideration and compensation elements is likely to vary on a case-by-case basis, reflecting site-specific circumstances and issues. Under the “old Code” (i.e. the Code as it existed before it was most recently amended by the Digital Economy Act 2017), new agreements tended to focus on a single payment, combining both elements, in the form of annual rent. Emerging case law suggests that under the “new Code” (i.e. the Code as it now exists following its most recent amendment by the Digital Economy Act 2017. All references to “the Code” in this guidance are, unless specified otherwise, to this version of the Code), this practice appears to be continuing.
However, it is important that when assessing any payment under the Code, there is full clarity and transparency on how the different components that make up the overall payment are assessed, to avoid double counting. In approaching the assessment of consideration and compensation, it is sensible to explicitly identify the factors that fall under both these headings to (i) avoid double counting and (ii) ensure all claim headings are properly considered.
REMINDER: the assessment of consideration under paragraph 24 of the Code is not an assessment under a compulsory purchase regime. The legislation provides for a separate assessment of consideration and compensation as they are sums payable for different things. Payment under one or both headings may be applicable depending on the circumstances of each case.
The full definition of Consideration is in paragraph 24 of the Code. Readers are encouraged to familiarise themselves with it as this guidance should not be read in substitution of it, or indeed any other term mentioned here.
For the purposes of this document, in general terms it is a one-off or periodic payment representing the value of the right to use the land for the term, on the terms that have been agreed or imposed. It represents, as the Code states, the market value of the site provider’s agreement to be bound by the Code rights.
Compensation, on the other hand, represents loss or damage sustained (or that will be sustained) by the site provider as a consequence of the agreement reached or imposed. It is the monetary equivalent of the loss or damage sustained. For more detail, see paragraph 25 and Part 14 (i.e. paragraphs 83 to 86) of the Code.
A process map covering the different steps to be followed when calculating consideration and compensation can be accessed here.
- need to disregard telecoms use
- other / alternative uses to which the land or asset may reasonably be put can be relevant
- nominal consideration may be appropriate where, realistically, the characteristics of the land or asset mean no-one would pay anything for them.
Consideration: legislative background
The Government’s 2016 response to its consultation on reforms to the Electronic Communications Code announced that ‘site providers should continue to receive fair payment (consideration) for the use of their land and that this should be in addition to simple compensation for any damage or loss of value to the land’. Additionally, as a matter of principle, payment should not include a share of any economic value created by demand for electronic communications services.
The statutory basis of the consideration element is found in paragraph 24(2) of the Code. It requires the assessment of market value being:
‘the amount that, at the date the market value is assessed, a willing buyer would pay a willing seller for the agreement: (a) in a transaction at arm’s length (b) on the basis that the buyer and seller were acting prudently and with full knowledge of the transaction and (c) on the basis that the transaction was subject to the other provisions of the agreement imposed by the order under paragraph 20.’
This assessment is subject to the following specific provisions of paragraph 24(3):
‘The market value must be assessed on these assumptions: (a) the right that the transaction relates to does not relate to the provision or use of an electronic communications network [i.e. the “no network assumption”] (b) paragraphs 16 and 17 (assignment, and upgrading and sharing) do not apply to the right or any apparatus to which it could apply (c) the right in all other respects corresponds to the code right and (d) there is more than one site which the buyer could use for the purpose for which the buyer seeks the right.’
What is consideration and what is being valued?
The key point is that the asset to be valued is the relevant person’s ‘agreement to confer or be bound by the Code right (as the case may be)’, noting that the definition explicitly refers to both parties being willing.
It is therefore necessary for the key terms of the agreement to be identified first because these will have a bearing on the market value of consideration. The appropriate agreement terms will normally reflect the current practice in the market within which the property is situated. For example, matters such as the duration of the agreement, the frequency of rent reviews (if any) and the responsibilities of the parties for maintenance and outgoings can all affect the market rent assessed under the consideration principles.
A practical consequence of the fundamental change to the statutory definition of consideration introduced by the 2017 reforms is that there is presently a relative lack of available empirical data on which to base a valuation judgment. In these circumstances, transparency plays an important role in smoothing the process of negotiating new agreements in an embryonic market. Therefore, in the absence of any overriding commercial or legal requirement, thought could be given to limiting the use of confidentiality clauses, as their inclusion would constrict the availability of comparable evidence.
The valuation exercise to be undertaken follows conventional lines with the inclusion of the assumptions of a willing buyer and of a specific transaction on a particular date and terms, in the open market with all the features present in that market. There are, though, some factors specific to the Code such as the no-network assumption, which are critical to the outcome.
Recent case law () acknowledges that other uses to which the asset/property might be reasonably put may be considered even though the only permitted use under the proposed agreement relates to electronic communications use.
When considering potential alternative uses, there is a need to assess the strength of the market for that potential alternative use or commodity and to recognise that the notional willing buyer embodies the actual level of demand.
Additionally, the fact that there may be only one bidder in the market does not mean that the price agreed will necessarily be a nominal one. Nevertheless, if the characteristics of the asset/property mean that in reality nobody would pay anything for them, a possible conclusion may be that their market value is nominal. The value of the land to the willing buyer will depend in every case on its characteristics and potential uses, and not simply on the number of potential bidders in the market.
Evidence of transactions for similar rights but granted for non-telecommunications purposes (such as parking compounds, weather stations etc) has the advantage of not requiring adjustment to reflect the no network assumption. #### It is likely to prove useful if it can be shown:
- that the subject property may realistically be of interest to those types of user; and
- there is also a realistic prospect of forthcoming planning permission for that use.
As emerging case law appears to be acknowledging, the valuation assumptions required to be made when assessing the amount of consideration payable may be impacting on the site provider’s ability to maximise the value of the land. This is because the site provider is prevented from realising that portion of the value of its land that is attributable to its suitability for use in connection with the provision of an electronic communications network. However, whilst acknowledging that position, the case law has also appeared to confirm that this does not give rise to a loss for which compensation is payable.
Additional factors to take into account when negotiating financial terms
In addition to the Code, when negotiating financial terms, local authorities are also asked to note:
- the economic benefits of making their area attractive for investment by network providers
- the social and economic benefits of digital connectivity for communities, and the UK as a whole
- state aid and financial propriety considerations
- the ‘no network’ assumption: payment should not include a share of any economic value created by demand for electronic communications services
Commercial agreements that permit communications network providers to use public assets (which include local authority land and buildings) must be consistent with State Aid and any relevant financial propriety requirements.
Consideration, compensation and the duty of best value
Section 3 of the Local Government Act 1999 sets out that local authorities are under a general duty of best value when allowing their land or assets to be used. However, this duty is not limited to obtaining the highest rent possible. In addition to economic considerations, site providers must also take into account ‘efficiency and effectiveness’. This holistic approach to defining the duty of best value encompasses the social and economic benefits of investment in digital connectivity.
When assessing market value, assets with little or no demand other than that for electronic communications are likely to attract low or nominal rent. However, where market value is assessed as the best price that can be reasonably obtained under the new Code, it can be argued that best value has been achieved purely in monetary terms and does not consider wider social and economic benefits.
Renewal of agreements protected by the Landlord and Tenant Act 1954
Some agreements dealing with local authority land and assets were concluded prior to the new Code being introduced, and they may therefore be protected by the Landlord and Tenant Act 1954 (“LTA 1954”). In such circumstances, the courts do not have jurisdiction to impose an agreement under the new Code. Where a consensual agreement cannot be reached, operators must apply to the courts for a new tenancy under LTA 1954.
It is open to local authorities to agree to a termination of an existing LTA 1954 lease and to enter into a new Code agreement consensually. In doing so, site providers should have regard for the wider definition of the best value principle described above, which takes into account overall value - including social value.
A process map covering the different steps to be followed when calculating consideration and compensation can be accessed here.