EE Limited & Anor v Affinity Water Limited

For a valuation of consideration under paragraph 24 of the Electronic Communications Code, the statutory assumption of an arm’s-length transaction between hypothetical parties requires vacant possession of the site. The actual operator and its apparatus must therefore be left out of account.

The three-stage valuation approach is a useful framework, but the hypothetical parties would ordinarily negotiate broadly and in round figures. Previous Tribunal decisions may indicate an emerging range of value for comparable sites. Future upgrade costs at a commercial site should normally be claimed as compensation when incurred, rather than estimated in advance as rent. Compensation may include reasonable professional costs incurred in pursuing a new Code agreement before the order conferring Code rights is made.

The claimants, operators under the Electronic Communications Code in Communications Act 2003, remained in occupation of a communications compound and water tower after their 1998 lease expired. They and the respondent water undertaker agreed that the Tribunal should order a new ten-year agreement under paragraph 34, but disagreed over annual consideration and compensation.

The site included a ground-level compound, antennae on an operational water tower, rights of access and a set-down area. The principal issues were whether the paragraph 24 valuation assumed an equipped or vacant site, the appropriate consideration for the agreed rights, and whether pre-order legal and valuation costs were compensable.

1. New agreement ordered. The Tribunal directed the parties to enter a ten-year agreement at annual consideration of £3,300. The claimants were also ordered to pay £7,500 compensation for reasonable professional fees.

2. For consideration under paragraph 24, as applied by paragraph 34(11)(b) of the Code, the assumed arm’s-length transaction is between hypothetical parties. That necessarily excludes the actual operator’s continuing occupation and requires vacant possession of the subject site. The operator’s apparatus is also assumed to have been removed. The contrary consensus previously accepted without argument could not determine the statutory construction.

3. The Tribunal used the three-stage valuation framework: nominal alternative-use value; benefits conferred by the agreement beyond occupation; and burdens imposed on the site provider. It rejected excessively granular examination of the provider’s expenditure. Willing parties negotiating a modest rent would use broad commercial judgments and round figures.

4. The resulting figures were £62.50 at stage one, £1,400 at stage two and £1,550 at stage three. A 10% uplift reflected the tenant’s annual break right. The final rent of £3,300 was consistent with the developing pattern of consideration in comparable Tribunal decisions for greenfield, water-tower and rooftop sites.

5. No separate rent allowance was appropriate for speculative future facilities-management costs. At a water tower, future upgrades ordinarily involve direct dealings and identifiable costs. Further professional or management costs caused by their exercise may instead be sought as compensation when they arise.

6. Paragraph 25 permits compensation for loss already sustained in connection with a claim for Code rights. Reasonable legal and valuation costs incurred before the order may therefore be recovered. The respondent recovered £6,000 legal expenses, but its unsupported valuation-fee claim was limited to £1,500.

This was a first-instance reference. The claimants served a notice under paragraph 33 of the Code on 17 December 2019 and commenced the reference on 15 April 2021 after negotiations failed. The Tribunal ordered a new agreement under paragraph 34 of the Communications Act 2003.