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Business Matters: When It’s Time To Hang Up; Terminating Telecoms Agreements

In our last article we provided some background to the new Digital Economy Act 2017 (“the Act”) and explained some of its key provisions.

The Act was put in place to replace the incoherent historic legislation governing various telecommunications practices including agreements between landowners and telecoms operators documenting the installation of telecoms apparatus.

The aim of the new legislation is to ensure that such agreements allow for guaranteed and uninterrupted digital networks. One of the ways in which the legislation looks to achieve this is to restrict a landowner’s ability to terminate a telecoms agreement and remove apparatus from a site.

Termination procedure

There is a new termination procedure under the Act:

Code Agreements automatically continue following the end of their contractual term, and landowners must now give 18 months’ written notice (ending on or after the expiry date) to terminate them.

At least one of the following four statutory grounds for termination must exist:

The operator is in breach of the agreement;

The operator is in rent arrears;

The landowner wishes to redevelop the site; or

The prejudice to the landowner of having the agreement in place outweighs the public benefit.

There is a new obligation on operators to serve a counternotice within 3 months of the termination notice. The operator must then make an application to court for a new agreement within 3 months of their counternotice to maintain their Code rights. In the absence of an agreement between the parties the court will then decide whether the agreement is to continue or terminate.

This procedure is a double-edged sword for landowners. Whilst operators have additional hurdles to overcome to maintain Code rights, the statutory grounds are potentially difficult to meet. As mentioned in our previous article, operators are now entitled to assign and share sites without consent, meaning that the number of potential breaches are reduced. There is also no ground on which the landowner can terminate if it wishes to use the site itself.

Removal procedure

Even if an agreement is terminated, a landowner doesn’t have automatic rights to immediately remove the apparatus from the site. The removal of apparatus by a landowner immediately on termination could potentially disrupt networks, and operators need time to install apparatus on alternative sites.

The removal procedure provides:

  1. That the landowner is required to give formal notice requiring the removal within a reasonable time. They can only do this where certain conditions apply – such as where a Code right has ended and there is no reasonable likelihood that the apparatus will be used again. The practical application of these conditions is yet to be seen. For example, it will be interesting to see how a landowner is expected to know when apparatus is unlikely to be used again.

  2. That where the conditions referred to at (a) above are satisfied, and the parties don’t reach an agreement on certain key terms of the removal within 28 days of the landowner’s formal notice, the landowner is entitled to apply to court for an order allowing it to remove the apparatus itself.

Transitional provisions

The Act will not generally have retrospective effect. However, there are various transitional provisions in place to allow the new Code to apply to old agreements but subject to modifications.

Objective achieved?

The intention of the legislation was to increase the flexibility available to operators, making it quicker and cheaper to roll out new sites, encourage investment in new infrastructure, and ultimately give telecoms operators similar rights to other utility operators.

In reality, the Code procedures may result in landowners being reluctant to let operators on their land, or (where telecoms agreements already exist) it may force increased litigation through the courts as operators seek to impose agreements against the landowner’s will. Landowners will have to find ways to mitigate the effects of the legislation through careful drafting of the agreements, and ultimately will have to focus on the strategic planning of sites in terms of termination and relocation. It is key that landowners negotiate these points with operators prior to entering into the agreements if they are to avoid becoming entrenched in the procedures. In the words of BT; “it’s good to talk!”.

 

by Karen Taylor
Associate Partner (Litigation)

Pierre Vannerem