A recent case heard at the Sheriff Appeal Court raised the following questions for the court: Did the fact that the operator had been granted compulsory land use automatically give them the right to continue sub-letting to the other operators even without permission of the landowner? Or did the operators have to make separate applications for compulsory land use?
The court’s decision makes some useful points that may affect landowners’ negotiations and contracts with telecoms operators. The case was Arqiva Limited v Kingsbeck Limited and the decision was published on 5 July 2019.
Before looking at the decision further, it is important to note that the case proceeded under the Telecoms Code (the legislation governing Telecoms sites) as it was before 28 December 2017 (the Old Code). Under the Old Code, it was possible and common for parties to agree in their contract that the landlord could not sub-let their equipment or the site without the permission of the landlord and/or without paying an additional fee to the landlord. However, when the Code was changed, the New Code made it impossible for the parties to make sub-letting equipment conditional on the landlord giving permission or receiving payment. That is to say, the New Code gives telecoms operators an almost unfettered right to use their equipment as they see fit, including allowing other operators to use it.
Backgound to the case
Returning to the present case, Kingsbeck is the owner of a site that is used by Arquiva Limited. Arquiva is a telecoms operator, which had masts and other telecoms equipment on the site. Arquiva’s occupation of the site was originally by agreement, but Kingsbeck terminated the agreement and sought Arquiva’s removal.
The situation was complicated by two factors: firstly, Arquiva had, without permission from Kingsbeck, sub-let parts of the site to other telecoms operators and allowed them to build cabinets and place other equipment at the site. Second, Arquiva made an application to the court to be granted statutory compulsory rights under the Telecoms Code to use the site, against the wishes of the landowner.
The question for the court was: in granting compulsory land use to Arquiva under the Telecoms Code, did that automatically give Arquiva the right to continue sub-letting to the other operators even without permission from the landowner? Or did the other operators have to make separate applications for compulsory land use?
The surprising decision
The court decided that the other operators did not have to make separate applications. The Court decided that Arquiva would gain the right to sub-let to other operators as part of being granted Code rights after their successful application for compulsory rights. The court’s reasons for making that decision are surprising and have important implications for other sites.
The decision is remarkable for three reasons. Firstly, though it was not contested by the landowner that the court could grant compulsory Code rights in the form of a lease, the court went further and said that in fact a lease was the only appropriate way in which compulsory Code rights could be granted in this case. The court decided this on the basis that the operator said it required exclusive control of the site and that could be achieved only by means of a lease.
Secondly, the Court then decided that once it was accepted that a lease was necessary, the operator then obtained all the benefits of a lease whether or not the Code provided for the operator to obtain those benefits by way of the compulsory access scheme.
To explain why this is significant, one of the benefits of a lease is that (unless the lease itself or an applicable statute specifically says otherwise) the tenant will have the right to sub-let the premises without the landlord’s permission and without having to pay any premium to the landlord. It is for that reason that leases normally prohibit sub-letting without permission. The court in this case granted the operator not only the basic compulsory Code rights it was expressly entitled to seek under the Code (which did not include the right to sub-let), but also the significant additional benefits of a lease unburdened by any restriction on sub-letting. This result was not merely incidental to the court’s decision to grant the operator a lease; it appears to have been the main reason for the court’s decision.
Thirdly, the main exception to the default rule on sub-letting is that the landowner’s permission is required where the identity of the sub-tenant is important or there are other reasons why the landowner needs to control who is able to gain access to the site.
The court seemingly accepted, without any evidence being produced, the operator’s assertions that:
- they would sub-let only to other telecoms operators;
- the landowner would be unable to resist any application for access from other operators;
- the site was so desirable to operators that in effect the landowner had lost all control over the site; and
- therefore the operator alone, as owner of the mast and as head tenant, should be able to decide who uses, and in what way they use, not only their telecoms equipment but the entire site.
It was also implied that a landowner could never have any reason to object to any particular Code operator, and therefore there was no need to place any sort of restriction on the operator’s right to sub-let.
What are the implications of the decision?
Although the decision was made under the provisions of the Old Code, it has important implications for cases under the New Code too. The decision tends to indicate that the courts will be sympathetic to the operator’s arguments that they should have certain rights not because they are necessarily entitled to them on a strict reading of the legislation, but rather and simply because they require them and because the landowner is said to be unlikely to be able to mount a successful challenge in separate proceedings to what the operators want to do.
The decision is also arguably in conflict with another recent case, CTIL v Compton Beauchamp Estates Limited, in which it was confirmed that in order for any operator to obtain full Code rights that bind the occupier of the site and the landowner (if they are different), it must obtain either i) permission from both the occupier and consent from the landowner; or ii) its own compulsory Code rights from the tribunal. That is the case under both the Old Code and the New Code. The court in the present case appears to have based its decision on an assumption that provided additional operators are granted a Code agreement from the occupier, they do not require the landowner’s consent in order to obtain full Code rights, including access rights. The court reached this view based on the Scots law of leases rather than on an interpretation of the Code provisions on compulsory access, and there is likely to be room for argument about this in future cases.
The court’s decision is bold in the way in which it found so clearly for the telecoms operator, and on grounds that are in some respects surprising.
To read more detail on this case, see the court document here.
