Telecoms leases and valuation in renewals under the Landlord and Tenant Act 1954
The recent case of EE Ltd and another v Morriss and others [2022] EW Misc 1 highlights the evolving approach of the courts in valuing rents under telecoms leases renewed under the Landlord and Tenant Act 1954 which, following renewal, will become subject to the Electronic Communications Code in Schedule 3A of the Communications Act 2003 (the Code).
The Court was asked to determine the terms of the new tenancy between the telecommunication provider tenants, EE Limited, and Hutchison 3G UK Ltd (the Operators) and the freehold owners of Pippingford Park Estate in East Sussex (the Site Provider).
In this case, the key matter in dispute was the rent to be payable under the new lease. The Operators argued for a rent of £950 against the passing rent of £19,000. The Site Provider's expert considered £12,000 per year was appropriate. The judge determined a rent of £3,500, taking into account the which included a contribution to the Site Provider's costs over the course of the lease.
In the Hanover case, a structured approach was developed by the court for determining the rent in 1954 Act renewals of telecoms leases. However, the judge in this case considered that it was only necessary to follow the Hanover approach where there was no reliable comparable evidence available. In this case, the judge considered a number of recent comparables, converting capital sums paid up-front to an annual equivalent. Within that range of comparables, he determined the figure that the hypothetical willing parties would have negotiated, having regard to the particularly factors he identified in this case, namely, the "significantly greater than average management time, inconvenience and potential for interference with other more profitable activities on the Estate".
This case again highlights the impact of the Code on reducing rents payable under telecoms leases and while the rent determined was ultimately over 3 times what the Operators had asserted, it was almost 3 times less than the Site Provider had pushed for and over 5 times less than the passing rent had been under the previous lease, with significantly greater rights for the Operators.