Farm Diversification and Telecoms
For many Scottish farmers and rural landowners, diversification is an increasingly important part of the business. Holiday accommodation, farm shops, cafés, wedding venues, glamping sites and visitor experiences can all generate valuable new income streams, explains James Elliott, Senior Solicitor at Davidson Chalmers Stewart.
But what happens when land earmarked for the next phase of diversification is already occupied by a telecoms mast – or an operator wants to install a new one?
This is becoming an important issue for rural landowners. Operators are regularly acquiring new sites while also renewing older agreements, often on terms which give them extensive rights over the landowner’s whole property.
What is the Telecoms Code
The Electronic Communications Code (“the Code”) gives telecoms operators significant statutory rights to install and maintain equipment on private land. The policy behind the Code is understandable, given the ‘5G revolution’ is going to change the way we communicate in almost every industry including transportation, healthcare and energy. The Code has shifted the negotiating balance significantly against landowners and in favour of operators.
Negotiating Code Leases
In the first instance, an operator will serve a statutory notice on the landowner with a set of heads of terms attached. Navigating the intricacies of the Code can be a daunting task, so the first and most important step is to seek expert advice. It is common practice for operators to cover some or all of a landowner’s costs in appointing a land agent/valuer to review the proposed commercial terms and instructing a solicitor to progress the legal drafting. By signing a set of commercial terms without receiving expert advice, landowners are immediately placed on the backfoot in lease negotiations. Taking expert advice will ensure that a landowner is making informed decisions and negotiating from a position of relative strength
The next step is agreeing the lease. Operators will often present their preferred style of Code agreement, but landowners should not assume that its terms are either non-negotiable or appropriate for their particular property. Rights will be sought not only over the area occupied by a mast, but also rights of access, rights to install cables and other apparatus, rights to carry out works, and rights to upgrade equipment or share the site. This may cause little difficulty on a working farm but could present a far more significant issue if the surrounding land is earmarked for diversification.
Potential Issues
An access route across a field may become the entrance to holiday accommodation. Land crossed by cables may be required for a café, farm shop or car park. A telephone mast beside agricultural buildings may suddenly sit next to a wedding venue or glamping development and become a glaring eyesore. Rights to undertake works could conflict with the operation of a visitor attraction. Landowners should consider these points at an early stage in the diversification process.
One could previously have argued that the telecoms site itself is another income stream for a landowner. However, the Code introduced a new “no scheme” valuation method, which considers the value of the land without factoring in the presence of telecommunications equipment (under the old regime, rent calculations were based on the market value of the land, as is the methodology for standard commercial leases). The diversification ‘potential’ of an area of land is not taken into account in the operator’s rent calculation. This method has, for most landowners, has resulted in a sizeable reduction to their rental income.
What if agreement cannot be reached?
Refusing an operator's proposed terms will rarely ever bring matters to an end. The Code provides procedures through which operators can seek interim (and later permanent) rights from the First-tier Tribunal if agreement cannot be reached. To then prevent the Tribunal from imposing a Code agreement, a landowner must prove that the prejudice to them outweighs the public benefit. Recent case law has shown this is a very high bar to pass.
What if you need the land back?
A landowner cannot necessarily bring a Code agreement to an end simply because its contractual term has expired. At least 18 months' notice is required and the lease can only be terminated if (1) the operator has substantially breached its contractual obligations (such as non-payment of rent); or (2) the landowner/site provider intends to redevelop all or part of the land to which the Code lease relates, or any neighbouring land, and could not reasonably do so unless the lease comes to an end.
An agritourism development could potentially fall within the second ground. However, a general aspiration to build holiday accommodation at some point in the future is very different from having a genuine redevelopment proposal. Timing is therefore critical. Waiting until a project is ready to commence before considering the impact of an existing or proposed Code lease can lead to delay, expense and uncertainty.
How can we help?
Davidson Chalmers Stewart advises farmers, estates and other rural landowners on the Code, including new agreements, renewals and operator notices. We have a track record in getting the best deal possible for landowners and can guide you through every step of the process.
Published By
James Elliot
