Compensation in telecoms lease renewals

For many years now, lawyers have been used to dealing with telecoms lease renewals, both under the Landlord and Tenant Act 1954 and under the Electronic Communications Code (the latest version in 2017).

Understandably, given the passage of time between the introduction of the Landlord and Tenant Act 1954 and the Electronic Communications Code, there was some disharmony in the valuation regime between the two pieces of legislation, which meant that, in some instances, the valuation was more flexible and therefore more generous to landlords.

To overcome this loophole, new regulations, the Product Security and Telecommunications Infrastructure Act 2022 (Commencement No 4, Saving and Transitional Provision) Regulations 2025, have now been passed and will bring into force, on 7 April 2026, important sections of the Product Security and Telecommunications Infrastructure Act 2022.

What is the current position and discrepancy between the 1954 Act and Code renewals?

Currently, the valuation position varies depending on whether the tenancy is being renewed under the old Code, entered into before 28 December 2017, or under the new Code, entered into on or after 28 December 2017.

Where a tenancy is renewed under the old Code and also protected by the Landlord and Tenant Act 1954, the 1954 Act applies to the renewal tenancy, and a tenant will currently pay rent at a level in accordance with the market rent assessed under the 1954 Act. There is no compensation potentially payable to a Landlord under the Code.

If the tenancy is being renewed under the new Code, the 1954 Act does not apply, and the tenant pays a lower base level of rent assessed on a no-network basis, less than would have been paid if it had been dealt with as a 1954 Act renewal. Here, there may be compensation payable to the landlord under the Code.

What will the new legislation do?

The new sections to be introduced will address this discrepancy by amending part 2 of the 1954 Act in relation to tenancies protected under that Act. The changes will mean that the financial terms on renewal of the tenancy are altered, by replacing the valuation frameworks contained in the 1954 Act with new provisions on rent and compensation that mirror those in the Code.

Effectively, the position will be harmonised, and the landlord will receive a much lower rent, although they may be entitled to some compensation in limited circumstances.

Under the Code, rent is assessed on the assumption that the rights to which the tenancy relates do not relate to the provisional use in the Electronic Communications Network. This means that even though the Code Operator can use the premises for a network, the rent is not valued on that basis. It is thought that this was the intentional objective when the legislation was first introduced in the Communications Act 2003, as the Government wanted to encourage the rollout of electronic communications infrastructure and networks by making it cheaper, rent-wise, to do that.

Currently, the renewal provisions apply the same no-electronic-communications-network valuation approach to the rent.

What about the new compensation provisions?

When the new legislation is enacted, the renewal provisions will also harmonise the 1954 Act and Code renewals for compensation that the court or tribunal might order the tenant to pay to the landlord for any damage or loss that is sustained or will be sustained by the landlord as a result of the exercise of any of the Code Rights conferred in the new tenancy.

Part 2 of the 1954 Act will be altered to allow for compensation to be paid in relation to tenancies protected and renewed under the 1954 Act whose primary purpose is to confer Code rights.

What might the compensation include?

Depending on the circumstances, the compensation might include payment for reasonable legal and valuation expenses, the diminution in the value of the land, and the costs of reinstatement.

What happens if I have a live tenancy as at 7 April 2026?

Transitional provisions are to be introduced to deal with this issue.

The new regulations include a saving provision that clarifies the transition between the two valuation regimes for live tenancies. Effectively, the saving provision means that the new provisions will not apply to 1954 Act renewals where the date specified in the Section 25 notice or Section 26 request falls before 7 April 2026. If the expiry date in the notice falls before 7 April 2026, the current 1954 Act regime will apply, under which the rent will be calculated on an open-market basis rather than a no-network basis, and no compensation will be payable.