The evolution of telecoms rooftop site valuation

The telecoms industry has undergone significant transformations since the introduction of the Electronic Communications Code (ECC) in December 2017. This legislation has brought about notable changes, particularly for landlords, who have seen reductions in rent and operators benefitting from increased rights under the Code. We caught up with Zoe Downes, a graduate in our telecoms team to learn more about why one of the most impactful changes has been the shift in how telecoms sites are valued, moving from their value to the operator to their alternative land use value with a particular focus on rooftop valuations.

The journey to understanding these changes has been marked by numerous tribunal cases, including those heard by the Upper Tribunal (Lands Chamber), the First Tier Tribunal, and the Lands Tribunal for Scotland. These cases have played a crucial role in defining how the new code is applied in practice.

One of the most notable cases which set a benchmark for how rooftop sites should be valued was Cornerstone Telecommunications Infrastructure Limited (CTIL) vs London & Quadrant Housing Trust, known as ‘Maple House’. Maple House was based on a three-stage valuation approach and set a benchmark for how all residential rooftop sites are valued;

1. Stage 1: Establishing an existing or alternative use value for the site 

1. Stage 2: Benefit to Operator from Site Provider’s Services

1. Stage 3: additional burden on Site Provider

The tribunal awarded a rent of £5,000 per annum (as of September 2020), broken down as follows:

• Stage 1: The AUV of the rooftop - £62.50

• Stage 2: The agreed service charge equivalent - £1,456.17 (rounded after Stage 1 and Stage 2 - £1,500)

• Stage 3 – Managing access £1,000; anticipated costs from future upgrades and shared use by Vodafone and Telefonica £2,500

The rights granted in this case were for CTIL to be able to share with up to two other operators being Vodafone and Telefonica. This was in keeping with Paragraph 17 of the Electronic Communications Code, which states that an Operator who has entered into an agreement under Part 2 of this code may upgrade and share the use of the electronic communications apparatus with another operator, if the conditions are met:

1. Any changes as a result of the upgrading or sharing of the electronic communications apparatus to which the agreement relates have no adverse impact, on its appearance

1. The upgrading or sharing imposes no additional burden on the other party to the agreement including an additional adverse effect on the other party’s enjoyment of the land or causes additional loss, damage or expense to that party.

The Maple House case concluded that the market value of a site provider’s agreement to confer code rights over a roof top site on any different residential building will be much more or less than the sum of £5,000 we have determined and that they would be surprised if values in other parts of the country were not in the same narrow bracket.

Following on from the Maple House case is CTIL v Marks and Spencer plc and Equorium Property Company Limited, often referred to as ‘M&S’ or ‘Princess Street’. This case involved a site in central Edinburgh, set a precedent for how commercial rooftop telecommunications sites should be valued. The tribunal established a three-stage valuation process:

1. Stage 1: Establishing an existing or alternative use value for the site.

1. Stage 2: Considering the additional benefits conferred on the operator by the rights, which may warrant additional payment.

1. Stage 3: Reflecting any greater adverse effect on the site provider than the existing or alternative use, sometimes quantified under compensation provisions.

The tribunal concluded that the annual rent for the site should be £3,850 per annum (as of July 2021), broken down as follows:

• Stage 1: The AUV of a rooftop - £50

• Stage 2: Insurance, service charge, temporary generator rights - £1,200

• Stage 3: General access management, electricity supply administration, out-of-hours access - £2,600

The tribunal did not value any additional sharing burden which the landlord might incur as there was only one sharer being proposed on the site.

• Building on this foundation, the recent case of EE Limited and Hutchinson 3G UK Limited v Verte Development Limited, known as ‘Crombie House’ further refined the valuation process. This case involved a property in Aberdeen and the claimant sought a new lease following the expiration of the current agreement. The tribunal used the M&S case as a benchmark and made adjustments.Access management – in the M&S case this was valued at £2,500, based on 20 visits per annum but in this case it was agreed at £280/visit and based on 10 visits

• Inflation adjustment 22% uplift from July 2021 to the decision date

• Floor rent principle from Vache Farm

This saw the final valuation agreed below compared to the M&S case.

These cases highlight the evolving landscape of telecoms site valuation and the ongoing efforts to balance the interests of landlords and operators. As the industry continues to adapt to the ECC, it is essential to stay informed about these developments and their implications for future site valuations.

For those navigating the complexities of telecoms site valuation, the Crombie House case serves as a valuable reference point, illustrating the importance of thorough and fair valuation processes in ensuring equitable outcomes for all parties involved.