The Department for Science, Innovation and Technology (DSIT) has issued a consultation on its proposal to introduce regulations which would change the way telecommunications leases which confer code rights are valued upon renewal (the "Regulations").
The Regulations
The Product Security and Telecommunications Infrastructure Act 2022 would amend the Landlord and Tenant Act 1954 ("LTA") and to the Business Tenancies (Northern Ireland) Order 1996 (the "1996 Order") to the extent which they govern the method of valuing leases upon renewal. The Regulations do this by
...replacing the valuation frameworks contained in the 1954 Act and the 1996 Order with provisions that mirror those in the Electronic Communications Code. This will ensure the method of calculating rent for renewal agreements conferring Code rights is more consistent across the UK.
The DSIT wants to clarify the impact of introducing the Regulations, taking care to do so in a way which:
- Ensures that "Live Tenancies" which have reached the point of renewal or termination can smoothly transition with minimal litigation and no notice to terminate or renew has been served; and
- Avoids landlords having to repay rent they have already received due to a potential backdating issue.
The consultation does not seek views on the policy aims of the Regulations, but rather on whether the proposed Regulations are likely to achieve the aims pursued and avoid the risks identified.
The valuation methods
The market value method
Under the LTA and the 1996 Order, rent under a renewed tenancy is to be assessed at the price that the property "might reasonably be expected to be let in the open market by a willing lessor". The provisions make no allowance for the particular nature of a lease which confers code rights, and so may not reflect a suitable market value or fair value of the lease being renewed.
The "no network" model
As determined under the Electronic Communications Code, the lease should be valued by reference to a hypothetical arm's length transaction which does not account for any value generated by "the provision or use of an electronic communications network".
This method ensures that the tenant does not pay an inflated premium based on their intended use of the property, compared to a hypothetical tenant who would make no or little use of the network.
Next Steps
The consultation will close on 2 July 2025, and all responses and enquiries can be directed to the DSIT's Barrier Busting Task Force, or emailed to PSTIconsultation@dsit.gov.
The consultation can be found here: Draft regulations to commence Sections 61 to 64 of the Product Security and Telecommunications Infrastructure Act 2022 - GOV.UK.
The DSIT expect to publish their response to the consultation later this year and to make regulations to bring these renewal provisions into effect shortly afterwards.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
