[2024] UKUT 216 (LC)

Having settled the terms of the new lease we can now consider the rent payable under it.

The rent or consideration payable under the new lease is to be assessed under paragraph 24 of the Code, adopting the “no-network” assumption which was explained in EE Ltd and another v The Mayor and Burgesses of the London Borough of Islington [2019] UKUT 53 (LC) at paragraphs [66] to [68]. The policy to which the assumption gives effect is that the fair return to the site provider “should not, as a matter of principle, include a share of the economic value created by very high public demand for services that the operator provides”.

The no-network assumption has given rise to difficulties because parties have been unable to produce much relevant evidence from which the value of a site suitable for telecommunications use can safely be determined when the fact that the intended use is for telecommunications must be disregarded. In the absence of reliable evidence the Tribunal has had to do its best with a more theoretical valuation model. In this reference we have been asked to revisit on the basis of transactional evidence what has become a relatively settled value for unexceptional rural sites. Before considering the evidence, we remind ourselves how that settled state came about.

The early paragraph 24 cases such as Islington focussed on the impact of the no-network assumption and how it could be allowed for in a valuation. Typically, expert witnesses called by site providers deployed a mass of evidence of recent and historic telecommunications transactions which they subjected to elaborate analysis in the hope of persuading the Tribunal that little had changed and that rents should remain at or not significantly below the levels seen in the open market before paragraph 24 came into force. The Tribunal made it clear that these propositions were simply unrealistic and that the very substantial costs being incurred in trying to prove them were being incurred in vain.

In Cornerstone Telecommunications Infrastructure Ltd v London and Quadrant Housing Trust [2020] UKUT 282 (LC) the Tribunal adopted a three stage approach to the assessment of consideration under paragraph 24, following the example of the County Court in Vodafone Ltd v Hanover Capital Ltd [2020] EW Misc 18 (CC). That approach involved determining the existing use value of the site (or any alternative use value, if higher), to which were then added a sum to reflect any additional benefit which would be conferred on the tenant by the letting (such as the benefit of occupying an already secure site), and a sum to reflect any additional adverse effect (or burden) which the activities on the site would impose on the site provider when compared to the existing, or alternative, use value. It is intended to arrive at a value which takes account of the factors which would be uppermost in the minds of negotiating parties if they were required to leave out of account the value to the operator of the right to use the site for the purpose of a telecommunications network.

The three stage approach was also employed by the Tribunal in On Tower UK Limited v JH and FW Green Limited [2020] UKUT 348 (LC) (“Dale Park”) to arrive at consideration of £1,200 per annum for a rural site with dwellings in close proximity. That figure comprised an agreed site value (stage 1) of £100, to which was added the Tribunal’s assessment of the value of benefits to the operator (stage 2) at £600 and of burdens on the site provider (stage 3) at £500. At [139] the Tribunal said regarding those burdens:

At [142] the Tribunal continued:

In the cases that followed, experts generally agreed to adopt the three-stage approach in their assessment of consideration, but this led them to focus excessively on the detail of potential benefits and burdens in a way which would not reflect normal market behaviour between parties negotiating a rent. The Tribunal remained concerned at the disproportionate expense being incurred in disputes over consideration and sought at an early stage to impress on parties the very modest sums which they could expect to receive.In Affinity having determined consideration of £3,300 for a site on a water tower the Tribunal included a table summarising the figures determined in its own earlier decisions and those of the Lands Tribunal for Scotland for residential, commercial and rural property referring to them as “guidance on the levels of consideration which parties can expect the Tribunal to determine in other cases”. The Tribunal observed at [83]:

Subsequently, in Stephenson, the Tribunal said at [70}:

And at [71]:

These attempts at expectation management have largely been successful, and we have seen many fewer references in which consideration has seriously been contested. The effect, as Mr Williams explained, has been that operators have adopted £750 as their invariable offer for rural sites based on the Tribunal’s figure in Stephenson. We do not see the introduction of predictability into negotiations over relatively modest sums as something undesirable provided, of course, that if a challenge to it is mounted, the Tribunal’s mind is not closed. Evidence in support of higher levels of consideration must be taken seriously, including evidence of the opinion of experts who have an understanding of the limitations paragraph 24 imposes and experience of letting the sort of property which has to be valued. That brings us to the expert evidence in this reference.