With the new Electronic Communications Code coming into effect across the UK on 28 December 2017, we highlight a few points worthy of mention in respect of its operation in Scotland.
Assignation and AGAs
Any agreement under the new Electronic Communications Code (the code) that seeks to prevent or limit assignation to another operator, or which imposes conditions (including payment of money) on assigning, is void to that extent.
Authorised guarantee agreements (AGAs) are, however, specifically permitted. The concept of AGAs is one created by the Landlord and Tenant (Covenants) Act 1995. It allows an outgoing tenant to guarantee the performance by its immediate assignee of its covenants (obligations) under a lease.
The code applies to Scotland in the same terms as elsewhere in the UK (save where specified), which means AGAs are carved out as the way for a landowner to seek comfort that the tenant obligations under an agreement to which the code applies (code agreement) are complied with post-assignation. This is a peculiar result for Scottish agreements given that the concept of AGAs
- is one created by an Act which (as with the other Landlord and Tenant Acts) does not apply in Scotland; and
- does not sit well against the long-established background of law in Scotland which, as a matter of principle, recognises that an assignor completely steps out of the picture when an assignee steps in as tenant.
Notices to quit and notices under the code
Under the old Electronic Communications Code (which formed Schedule 2 to the Telecommunications Act 1984) (the old code), there was uncertainty on the part of both landowners and operators in Scotland as regards exactly what constituted a notice by a landowner requiring removal of apparatus under Paragraph 21. Was the notice to quit under the lease sufficient or was an additional notice under the code required? And when should that be served?
The old code did not provide a clear answer. Landowners sometimes ended up issuing a number of notices at various times to ensure the requisite notice had been served. Operators then responded to each notice with counter notices under paragraph 21 (where required) to protect the integrity of their network while negotiating new terms or seeking an alternative suitable site.
Paragraph 31 of the code clarifies what a landowner's notice must include to bring a code agreement to an end.
The date on which a landowner states an agreement should come to an end must be at least 18 months from the date on which the notice is served and must fall after the expiry date of the agreement or after a break date. The theory is that this period of time should allow an operator time to find an alternative site and build it - though even this can prove tight in practice.
The notice must also specify one of the grounds listed in Paragraph 31. The first three grounds will be recognisable to lawyers in England and Wales as they are based on some of the grounds on which a landlord can oppose the grant of a new tenancy under the Landlord and Tenant Act 1954. The grounds will be new to a number of us in Scotland where the Landlord and Tenant Acts do not apply. They are:
- substantial breaches of the agreement by the operator;
- persistent delays in payment by the operator;
- intention to redevelop, which the landowner could not reasonably do unless the agreement comes to an end; and
- that the operator is not entitled to an agreement under the code because the test under paragraph 21 is not met. The paragraph 21 test is that to be applied by the court when asked to impose an agreement on the parties.
If any of the first three grounds are to be used, it may be that looking to case law under the Landlord and Tenant Acts in England and Wales will assist interpretation.
These new code provisions imposed an additional requirement on landowners serving a notice to quit, in that they need to give one of four reasons why an agreement should end but it clarifies what is required.
The intention behind these code provisions is to balance the interests of landowners - where they have a genuine need or justification to take back their land - against those of the operators who need to ensure continuity of coverage and network integrity to serve consumers with increasing demands and expectations of continuous, high performance connectivity.
Clarification on who is bound by code rights
The provisions of the old code were not entirely clear as regards which parties were bound by code rights. The new code confirms that a code agreement will automatically bind the "occupier" of the land as well as its successors and anyone deriving their right from that occupier or successors.
It will also bind any other person with an interest in the land who has agreed to be bound and their successors and anyone deriving right from them. If, therefore, a tenant under a lease of land enters into a code agreement with an operator, it is clear that the heritable proprietor of that land will not automatically be bound by the code rights; they would have to agree to be bound.
The ability for those parties who have not agreed to be bound to require removal of the apparatus is then set out in part six of the code.
No land registration required for successors to be bound
Paragraph 14 of the code makes clear (as was arguably implied the old code) that even if the agreement under the code would, by its nature, require registration in the Land Register to bind successors, parties bound by code rights will be bound whether or not the agreement is registered. So for example, a 25-year lease which constitutes a code agreement will bind successors of the original parties even where that lease has not been registered in the Land Register.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.