Case No. UKUT-152-(LC)-UTLC-Case-Number:-LC-2021-240

. The first stage is to determine the current or highest alternative use value of the site. Stages 2 and 3 were explained by the Tribunal in Affinity Water at [39] as follows:“The heart of the dispute lay in stages 2 and 3 of the assessment which are intended to reflect the additional benefits over and above the right of occupation, which will be conferred on the tenant by the agreement and which it would otherwise have to provide for itself, and any adverse effect on the site provider, over and above any effects which would be a consequence of the use of the site for the purpose reflected at stage one. The theory underlying these stages is that they reflect all of the matters which would be in the minds of parties negotiating a rent which did not take account of the economic value to the tenant of the activity it intended to conduct on the site. They attempt to measure what paragraph 24(1) of the Code calls “the market value of the relevant person’s agreement to confer … the Code right” while respecting the statutory no-network assumption in paragraph 24(3)(a).”222.There was some discussion at the hearing, in answer to a question posed by the Tribunal, as to whether the assessment of benefits and burdens in stages 2 and 3 is appropriate where the site has a valuable alternative use, and we confirm – as is clear from the words just quoted – that the three stages are indeed cumulative and should all be undertaken even where (as is the case for Audley House, as we shall see) the value of the alternative use is considerably higher than that seen in other decisions where the Hanover approach has been used. The idea is that the site provider gets the current or higher alternative use value and also a sum to reflect the benefits to the tenant (over and above those conferred by the existing or alternative use) and the burdens undertaken by the landlord (beyond those involved in the existing or alternative use) as a result of the activity envisaged under the lease, such as the installation of a very tall structure and the likelihood of frequent visits, insofar as those benefits and burdens would not be caused by the alternative use.223.The Tribunal has now made a number of decisions on that basis, and in Affinity Water it set them out in tabular form. In all of these cases the site had no higher alternative use value and the stage 1 component of the assessment was a nominal, current use value. With the addition of the outcome of the Affinity Water case itself, and in descending order of value, that table now looks like this:224.In Affinity Water the Tribunal said at [34]:“These decisions provide guidance not only on an approach to valuing sites on the artificial assumptions required by paragraph 24, but more broadly on the levels of consideration which parties can expect the Tribunal to determine in other cases. Without taking account of any special features or particular sensitivities which a particular location may exhibit, we would be surprised if the value of Code rights fell significantly outside the ranges indicated by previous decisions concerning sites with similar characteristics.”225.And at [83]:“ We would suggest that the pattern, or tone, is now becoming clear enough that it should rarely be necessary when presenting evidence to the Tribunal in future for parties to adopt the much more detailed Hanover Capital approach to valuation.” 226.Those comments, and the Tribunal’s warning about the dangers of using consensual transactions as comparables, provide guidance on the approach that is likely to be of assistance to the Tribunal. Absent special features (such as a valuable alternative use), it is unlikely that the Tribunal will assess consideration at a level that is not consistent with the range of values seen in the table above. The Tribunal is unlikely to be assisted by analysis of comparables, save for the value of alternative uses where that is in dispute. The Hanover approach may be useful as a cross-check in negotiations, but the Tribunal will not be assisted by micro-analysis of the cost of benefits and burdens measured in tens of pounds which (as was also pointed out in Affinity Water at [41]) is not how negotiations work in practice.227.The valuers in these references wrote their reports before the publication of the Affinity Water decision, and therefore relied upon the type of material – extensive analysis of comparables and exhaustive costings of benefits and burdens – that the Tribunal has now explained are unnecessary and unhelpful. The valuers in their initial reports were some thousands of pounds apart, and were no closer in their supplemental reports after Affinity Water had been published. At the hearing they were reminded of the Tribunal’s comments in Affinity Water; at the Tribunal’s invitation they had further discussions and agreed the consideration payable for all three sites.Alternative use value and restrictions in the site provider’s title228.Consideration will always include the value of the current use of the site or of any higher alternative use value. All the sites represented in the table above had a nominal or very low use value. Other sites, and Audley House is one of them, will have a higher value which may make the eventual consideration look out of kilter with the table, but consistency will be seen if that additional value is kept in mind.229.Whether high or low, alternative use value is always going to be relevant. This is the use for which the site provider could let the site. If the site provider is itself a leaseholder whose lease restricts the use to which the site could be put – for example, for agricultural use only – then that will be relevant to the determination of the alternative use value. In such a case it is not possible to assume that the site could be let as an industrial unit or for storage or parking.230.In the present references there is obviously no difficulty in assuming a letting for an alternative use for Port Talbot and Huntingdon, where there is no real restriction on the use for which APW can let the site. But in Audley House the permitted use of the site in APW’s intermediate lease is:“for the transmission and reception of any and all wireless communication signals and the construction, maintenance, repair, replacement, improvement, operation and removal of Equipment, and any related activities and uses including those necessary for the Tenant to comply with its obligations under the Existing Leases”.231.Paragraph 24 of the Code requires the assumption “that the transaction … does not relate to the provision or use of an electronic communications network”; but on that assumption and in light of the restriction on use in APW’s headlease the site has no alternative use value.232.Should consideration be assessed on that basis? The Tribunal should make only those assumptions, in departure from reality, that are set out in the Code; but sometimes it is inevitable that we have to go further. Lewison LJ said in Harbinger Capital Partners v Caldwell [2013] EWCA Civ 492, at [26]:“A departure from reality must either be expressly required or must be an inevitable consequence of what has been expressly required.” 233.It is not the policy of the Code that site providers should get no value at all for their land, and paragraph 24 operates on the premise that the site provider really could let the site for some use other than for telecommunications. No express provision is made in paragraph 24 for a restriction on the site provider’s use such as that in the Audley House intermediate lease; and while we would have had no difficulty in dealing with a restriction that prevented some but not all other uses, we think that it is an inevitable consequence of the exercise prescribed by paragraph 24 that the complete prohibition of sub-letting by APW for uses other than as a telecommunications site should be ignored for the purposes of determining consideration. Absent that prohibition the site could be let for parking, and the valuers reached agreement on that basis.The valuation evidence: general approach234.Because consideration was agreed in the course of the hearing we are not going to set out the evidence at any length.235.Valuation evidence was provided by Mr Colin Cottage BSc (Hons) MRICS IRRV (Hons) for On Tower and by Mr Paul Williams MRICS for APW. Mr Cottage is the Managing Director of Compensation at Ardent and Mr Williams is Head of Telecommunications at Carter Jonas. Both have substantial experience in providing valuations for telecommunications purposes. 236.As we said above, the experts wrote their reports prior to the Tribunal’s decision in Affinity Water. They produced supplemental reports with the benefit of that decision, but considered that these three sites were so different from those recorded in the table that further analysis based on the Hanover methodology was needed. Both experts relied on comparable transactions, not only relating to consensual transactions but even, in Mr Williams’ case, to leases bearing the caveat that they were negotiated after the Code came into force but on the principles of the old Code. The Tribunal has said on more than one occasion that such comparables are useless.Audley House237.In his original report Mr Cottage’s three-stage Hanover valuation of Audley House was as follows:Step 1 £NilStep 2 £600 per annum