The Vache Farm Decision opens the door for increased rents for landowners

The decision by the Tribunal in EE Ltd and another v AP Wireless II (UK) Ltd [2024] UKUT 216 (LC) (the “Vache Farm Decision”) has opened the door for increased rents in lease renewals for telecommunications mast sites. This will no doubt be a welcomed development by landowners, where, following the introduction of the new Electronic Communications Code (the “Code”), landowners have seen rents plummet.

1.The background of Vache Farm

The case concerned the renewal of the lease of a greenfield telecommunications site at Vache Farm in Buckinghamshire (the “Site”) under which AP Wireless II (UK) Ltd (“APW”) are the landlord and, EE Limited and Hutchison 3G UK Limited (“EE/H3G”) are the tenants. The rights granted by the existing lease had continued under the Code after the expiry of the contractual term back in May 2020. EE/H3G sought new Code rights over the Site and one of the remaining significant matters in dispute was the rent. The Site itself is described by the Tribunal as a rather “unexceptional rural site”, located in a grass field beside a wooded area.

2. The Tribunal’s decision

For the first time since EE Ltd and Hutchison 3G UK Limited v Affinity Water [2022] UKUT 8 (LC) (“Affinity”) and EE Ltd and Hutchison 3G UK Limited v Stephenson and another [2022] UKUT 180 (LC) (“Stephenson”), the Tribunal was asked to re-visit the rental value of “unexceptional rural sites” and have provided guidance on this which will impact not only renewals and new agreements, but also rent reviews under any existing code agreements which provide for open market rent reviews.

Up until the Vache Farm Decision, the Tribunal had adopted a rent of £750 per annum for a typical rural mast site isolated from any houses. APW argued that the rent of £750 per annum was too low and its expert witness led extensive evidence of rents in various non-telecommunications lettings of small rural sites in support of this. In addition, it was accepted by the experts for both parties that the rental figure prescribed by the Tribunal for “unexceptional rural sites” in Affinity should be adjusted to allow for inflation.

Upon considering APW’s expert evidence and accounting for inflation over the past three years since the decision in Affinity, the Tribunal was persuaded that the previous figure of £750 per annum for an “unexceptional rural site” is not appropriate and should be re-assessed. The Tribunal decided that the suitable annual rent for a rural mast site is £1,750.

3. What could this mean for landowners?

The Vache Farm Decision will give landowners more power in negotiations with operators to demand a higher rent. The Tribunal was also clear that the rental levels prescribed in Affinity should be updated in line with inflation, but the Tribunal did not find it necessary to amend its figures. The Tribunal commented at paragraph 85:

“We do not consider it necessary to update the table of figures in Affinity in January 2022, nor to identify any particular relativity between consideration for rural sites and those in other situations, other than to reiterate the impact of inflation on figures determined in previous years.”

The discussions in this case around inflation also emphasise the importance of including appropriate rent review provisions in agreements for mast sites to ensure landowners do not find themselves stuck in a lease at a low rent for the entire term without any ability to review the rent.

Landowners approached by operators to enter into an agreement, whether that be for a renewal or otherwise, should ensure they take appropriate legal advice on its terms. David Bell and I have extensive experience in telecoms matters and would be happy to help landowners who find themselves in this position.