Do you own land or a roof and, when a mast, cabinet or other telecoms gear goes on it, your site agreement could be your most profitable and least recognised revenue stream. Your landlord might assume that the rent you agreed to, a year or two ago, stays fixed, when, in reality, many of those agreements include various rent review clauses.
A lot has changed to the test for when rent is reviewed since the Electronic Communications Code 2017. If you’re aware of what causes a review you’ll be in a better position to act promptly and not leave revenue on the table.
Trigger Points of an Existing Site Agreement
1. A Rent Review Clause in Your Contract
The most basic trigger is a rent review clause in the agreement. The older telecom leases and licences have a rent review every 3, 5 or ten years. They have a rise based on the Retail Prices Index (RPI) or a set percentage.
Read the clause carefully. There are upward only reviews, open market reviews and index linked reviews. When you are entitled to a rent review, the notice period and how you work out the new rent is determined by this clause. If you miss the review date or the notice period you may have to wait until the next review date to increase the rent.
Another factor to consider is whether the clause has been enforced before. If previous renewal date(s) were not observed or not entered then the agreement may still be paying an old rent, which it is crucial to discover what the lease gives you the right to do.
2. Expiration of the Contractual Term
Not quite so simple after the agreed end date. Agreements covered by the Code may have an end date that is later than the end date of the individual agreement until they are either terminated or replaced in accordance with the Code.
This is usually when the rent is reviewed. The operator and the landowner can start discussing, and frequently a new rent will be agreed in this way. For the landowner, the end date should be a prompt to review the market position well in advance.
3. Notices Served Under the Electronic Communications Code
The Code lays out a process for renewing or changing a land agreement. It states that an operator can serve a notice to agree to a new rent or conditions and that a landowner can also seek a replacement agreement.
Another key issue; having to receive notice. Time limits may be strict in replies and a pause may not be a good thing. Simply agreeing to the rent offered, putting it in the light of the evidence may not be adequate as some operators may provide their outcomes based on the valuation procedure of the Code that is way below of the past rents.
As these are procedural requirements, property owners may find it helpful to have a schedule of when notices are issued, when they can respond, and what evidence they will need to submit to support their suggestion for an alternative.
4. Equipment Upgrades and Network Sharing
All the mobile networks evolve and 4G and 5G rollout has been a catalyst for many operators to put or upgrade kit at existing locations. Additional antennas, bigger cabinets, more dishes or new cables can all impact on the footprint and use of your land.
In some cases, if the agreement restricts you to variations, an upgrade may require your consent or a variation of the agreement itself, leaving scope for the rent to be re-negotiated. Where an operator is giving its apparatus to another operator then the whether you should pay extra or agree different terms depends on the Code and your agreement.
Up-to-date photographs and records of what has been installed can help to determine whether any specific upgrade has gone beyond the original contract.
5. Changes to the Site, Access or Land Usage
Another alternative can be if there is any physical change. If the operator requires larger compound space, new access, additional power or fibre, the contract could need to be varied to take into account the greater impact of your land.
It’s the same in the opposite direction. If you were looking to redevelop or change your property you would, in effect, have to consult with and negotiate with the operator, whatever their arrangements, about their re-location and terms and access. Of course, this would normally result in an agreement over rent and commercial terms.
6. Ownership or Operator Changes
The sale of the land, an assignment of the deal or a corporate restructure on the side of the operator are all factors that could trigger a fresh review of the agreement. In the telecoms industry, infrastructure companies have acquired a number of site portfolios.
New owners and new operators tend to standardise documents, revise commitments or to marry older schemes up with the Code. It may be a time for the landowner to freshen up the terms, but it can also spotlight arrangements that are out of step with the market.
If you have a grouping of sites an operator may select general language for many of these leases. A site by site approach should be taken as variables such as location, exposure and options of use will impact value.
7. Market Evidence and Tribunal Decisions
Unless the Code states otherwise, when coming to the rent figure a general valuation of the use is often used e.g. the value of the land for that use assuming that there is no operator s network on it. Tribunal decisions have expanded the test since 2017 and evidence of similar sites may be relevant.
They are also changing what the operators will be doing and what landowners can hope for as a result of new decisions and settlements that are emerging. Landowners need to know that when they last had their land valued it may have moved up or down with the market – up-to-date advice is needed.
The value of rural and urban sites can vary greatly so it is important that we compare sites in similar environments.
What Should Landowners Do?
Determine the agreement, its variations, diarise any review, expiry and notice dates. Make a note of any works on the site such as enhancement or expansion equipment as these can influence your bargaining position.
Never react to or sign anything without understanding or gaining advice about the operator’s notice or rent proposal. A hasty reply – especially one giving the wrong amount or a reply received too late – can be costly and difficult to rectify.
Conclusion
Rarely will you see a telecoms site agreement exactly as before. Going through the clauses, expiry of the term, Code notices, upgrades to equipment, changes to the site, ownership changing hands and evidence of the market all may cause you to reconsider rent and the terms.
Getting assistance from a skilled adviser on your case at Arc Partners can help you understand your rights, establish the value of your site today and support you in preparing for any review.
FAQs
Can a landowner request a rent review mid-term?
Only if the contract has a review clause or if the parties agree. Otherwise the rent is fixed until the end of the term, or until the Code renewal date.
What is the rent calculation under the Code?
Rent equals the worth of the land for its intended use assuming a contented owner and a willing to operate land owner but does not take into account the worth of the network itself.
Will a rent review always increase my rent?
Not as a general rule. It depends on the exact words of the clause, and on the relevant market evidence. Some contracts are upward only: some contract rents will even fall in the Code.
What happens if the operator and landowner cannot agree?
Either party can seek the Tribunal to set a rent and terms. At an early stage getting expert advice and negotiation may prevent costly and lengthy proceedings.
Does equipment upgrading give landlords a right to higher rent?
Not necessarily. Is there a clause in your contract allowing for upgrades? Changes such as additional cupboards or drawers or similar may arguably warrant a fresh deal or require extra payment under the Code.
What is the best time to get expert legal advice on a telecoms rent review?
As early as possible after you receive an operator notice or rent proposal Or get a review date Early advice on valuation safeguard your financial interests in the long run.