Window of opportunity to review phone mast agreements

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Scottish farmers and landowners with a mobile phone mast on their land are achieving deals that pay an average annual rent of £6,029, according to Strutt & Parker’s 2016 Telecommunications Survey.

It is well below the average claimed by the operators and rents are likely to fall still further once the new Telecoms Code is introduced next year, say the firm’s telecoms specialists.

The specialists also warn landlords including churches, charities, schools, local authorities and private individuals to negotiate any lease reviews or terminations before the new regulations kick in and they become subject to stricter conditions.

Site providers who leave it until next year and beyond will find themselves in a very different, and much weaker, position, says the firm.

Negotiating a new lease or agreement now will avoid some of the more contentious issues in the new legislation and will also secure a rent based on market value rather than compensation, which will be the case going forward.

The survey shows that the five-year rolling average rent for greenfield site deals is £6,022 per year – although many of the more rural sites are well below this level – which is considerably less than a survey carried out by Deloitte on behalf of the mobile operators which put it at £7,506.

Ian Thornton-Kemsley, Scottish telecoms specialist at Strutt & Parker, said: “It has become clear that agents for operators are approaching landowners across Scotland and the rest of the country seeking site leases on very operator-friendly terms and in some cases offering rents of just £3,000 and demanding unrestricted rights. This is well below market value so take professional advice before agreeing to anything.

“When lobbying the Government for reform of the Telecoms Code, operators have claimed that landlords are effectively holding them to ransom and have unfettered power. We have found little evidence of ransom in the market place. They also claim that average rents stand at £7,506. Not so, apparently.”

“Operators have also maintained that the height of a mast is not a factor in rents, but our analysis of transactions over the past five years does not support this assertion. It shows that rents are higher for taller masts, with the average greenfield site rent for a mast in excess of 30m more than £8,000/yr, compared to £5,000/year for a mast under 15m.”

Mr Thornton-Kemsley warned farmers that the new Telecoms Code, currently being debated in Parliament as part of the Digital Economy Bill and likely to come into force in spring 2017, could mean radical changes for mast rents.

Currently, site providers and operators are free to negotiate a market rent. However, the bill will end this practice and landowners will instead be paid on the basis of land value, regardless of what use it is to be put. This is likely to be at much lower rates.

Most current leases restrict the right to share sites with other operators or assign leases and upgrade equipment because of the potential impact on the land. Where network convergence has taken place and two operators are sharing the same mast, without an additional site share fee being payable, base rentals are generally £750 to £1,500 per annum higher than for single user sites. The proposed Bill will allow operators the rights to share sites, assign leases and upgrade equipment without either further payment or the need for the landlord’s permission.

The Government states that the bill will not affect agreements entered into prior to it being enacted but Mr Thornton-Kemsley said this was not necessarily the case. “Potentially, operators will be able to use break clauses to bring existing leases into the new provisions. I cannot emphasise enough how important it is to review terms now to ensure landlords are in the strongest possible position.”

Mr Thornton-Kemsley said that while the current arrangements had been criticised for being unworkable, the mobile operators have been able to successfully construct networks and the code has seen little activity in the courts.

“The Government’s changes to the code are now so operator-friendly that there is likely to be little incentive for farmers and other site providers to agree terms,” he said.

“The new code is likely to be tested and disputed to a far greater extent, which I suspect is now likely to hamper the rollout of new sites rather than facilitate it as the Government had intended.”

Mr Thornton-Kemsley warned: “Anyone thinking about renewing, terminating or reviewing a lease should do so immediately in order to make sure terms are agreed under the current code. The process normally takes six months and the new code is likely to come into force in the spring. This is the final window of opportunity to start negotiations. Site providers really are running out of time.

“Landowners need to preserve their position, so they can litigate under the old code, rather than the new one. There is no guarantee that every lease will be protected but it will put site providers in a much stronger position.”

For further advice and information or help with lease reviews contact Ian Thornton-Kemsley in Strutt & Parker’s Banchory office on 01330 826 813.