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Prejudice to landowner is too high to impose Code rights on its land

The Electronic Communications Code gives powers to telecoms operators to acquire rights over private land to install their apparatus for the purpose of providing their network. In order to impose rights against a reluctant landowner, the operator must establish that the prejudice caused to the landowner by the imposition of those rights can be adequately compensated in money and that the public benefit of imposing the rights outweighs that prejudice.

In a recent decision, Cornerstone asked the Tribunal to impose an agreement conferring permanent Code rights to install and operate their apparatus on the roof of a building in Elephant and Castle, which was owned and occupied by the University of Arts London. Cornerstone needed a new site in the area having recently been ordered by the Tribunal to leave two other roof-top sites nearby for redevelopment.

The University had already entered into an agreement with a developer to construct a new building for them. Once the new building was completed, the University would sell its existing building to the developer but would remain in occupation under a three-year leaseback to give it time to fit out the new building before moving in. The first 18 months of this leaseback were rent-free, but then the annual rent would increase to £3,000,000. The University had the benefit of a break clause in the leaseback which enabled them to terminate it at any time. However, the break was conditional on the University delivering vacant possession of the existing building to the developer, specifically, free of telecoms apparatus. The significant hike in rent after 18 months created a strong incentive for the University to complete its fitting out works of the new building and exercise the break clause in the leaseback within that first 18 months.

The price of prejudice

It was accepted by both parties that if Code rights were imposed, the University would need to terminate those rights and successfully remove Cornerstone’s apparatus before it could deliver vacant possession. Since Cornerstone would have security of tenure under the Code, and hadn’t left its previous buildings voluntarily without a court order, the University argued it would probably have to litigate to obtain possession. It argued that it would have to follow the 18 month notice procedure in the Code and obtain an order from the Tribunal to terminate the Code rights on one of the statutory grounds and then separately secure an order for removal. There was no guarantee how long that would take and it was likely that the University would be unable to exercise the break in the leaseback at 18 months, which would have significant financial repercussions.

The University also argued that the consequences of litigation would be unpredictable and damaging to their reputation. In the worst case scenario, if the University was not able to deliver vacant possession at the end of the three year term of the leaseback, it argued that the developer could seek an injunction against them. The University’s position was that their prejudice was unquantifiable and could not be compensated by money. Further, the public benefit of imposing the Code rights did not outweigh that prejudice.

Cornerstone argued that that there was a chance the development of the new building would be delayed and in any event, the University would be able to obtain the various orders under the Code to require them to remove their apparatus. Any prejudice suffered could be compensated and would not outweigh the public benefit.

The Tribunal found in favour of the University: there was a real risk of litigation (both under the Code to remove Cornerstone and from injunctive proceedings by the developer), which would create stress, uncertainty, reputational damage and could harm the University’s relationship with the developer and its students. The Tribunal acknowledged that the prejudice must be “very high indeed” to outweigh the competing public benefit, “but there comes a point when it is too much to ask”. In this case, impeding the University’s ability to perform its pre-existing contractual obligations would reach that threshold. As such, the Code rights were not imposed.

Cornerstone Telecommunications Infrastructure Ltd v University of The Arts London [2020] UKUT 248 (LC), The Upper Tribunal (Lands Chamber)