Lease renewals of old telecommunications leases

12 February 2024

Aman Sahota-Dhatt, a principal associate in our commercial property team, is a specialist in handing telecommunications leases. She often works alongside Peter Humpherson, in our property litigation team, on lease renewals of old telecommunications leases which require updating in accordance with the new Electronics Communications Code, which came into force in December 2017.

With the changes created by the new code – the commercial property and property litigation teams have seen an influx in telecommunication renewal leases taking longer to negotiate and agree. Landowners are expecting leases to be on the same terms as the documentation already in place, but operators are using the renewal as a mechanism to re-negotiate a variety of terms, not just those that assist their position under the new code.

In one transaction, heads of terms had generally been agreed between the parties. These spanned over 15 pages and had been intricately negotiated with the assistance of specialist agents and the property litigation team at Higgs LLP. There were however some headline terms that had not yet been agreed but were being discussed on an ongoing basis.

The draft lease was issued by the operator but in addition to the terms that had been agreed, the operator had included numerous provisions that had not been discussed. Furthermore, Landowner issues such as lift and shift provisions, notification provisions for any assignment or sharing of equipment, and the review mechanism of rental payments were all additional issues that had not been accounted for. All these points therefore needed to be considered, reviewed, amended or incorporated.

Site specific drafting also needed to be considered. The draft lease issued by the operator was clearly a generic document incorporating the basic terms of the deal, however practical site-specific considerations also needed to be included. In this case, for example, the operator had the option to connect into the landowner’s electricity supply from their adjoining premises which had safety and cost considerations that needed to be addressed.

The main issue of contention in this transaction however included heavy negotiation over the extent of the rent attributable to the site. With the implementation of the new code, rent can fall by as much as 90% as a “no scheme” valuation is used. What this means is the parties must exclude any element of value relating to the telecoms operators’ intention to use the site as part of its network when assessing rent.

Despite expert valuations recommending a higher rent, the operator was resistant to accept any deviation from their original proposal, but through careful further negotiation and the imminent possibility of having to take this issue to court, we were successfully able to reach a compromise position that both parties were happy with.

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