Clause 61 - Rent under tenancies conferring code rights: England and Wales

Product Security and Telecommunications Infrastructure Bill – in a Public Bill Committee am 2:00 pm ar 17 Mawrth 2022.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Chris Elmore Chris Elmore Opposition Whip (Commons), Shadow Minister (Digital, Culture, Media and Sport) 2:00, 17 Mawrth 2022

I beg to move amendment 8, in clause 61, page 45, line 37, at end insert—

“(4A) Where the assumptions in subsection (4) cause the market value of a landlord’s agreement to decline, the rent payable under a new tenancy granted by order of the court under this Part of this Act shall not decline by more than 40%.”

This amendment would provide a legal guarantee that site providers’ rents fall by no more than 40% under any new agreement.

Photo of Graham Stringer Graham Stringer Llafur, Blackley and Broughton

With this it will be convenient to discuss the following:

Clause stand part.

Clauses 62 to 65 stand part.

Photo of Chris Elmore Chris Elmore Opposition Whip (Commons), Shadow Minister (Digital, Culture, Media and Sport)

The Government introduced the electronic communications code in 2017 and promised at the time that reductions in rent would, in reality, be no more than 40%. However, as we heard from Protect and Connect during Tuesday’s evidence session, there have been thousands of cases in which small tenant farmers, sports clubs and community organisations that host masts have seen their rents fall by vastly more than that, with many facing reductions of more than 90%. That was confirmed during the evidence session, when a question was asked about the average, followed by questions from other Members, including me. That clearly showed that there had been far higher reductions for some organisations and owners. One such case is James, a 71-year-old sheep farmer who has maintained a mast on his farm for 15 years, normally receiving £2,900 a year in rent. In 2020, James received a letter informing him that he was now being offered £200 a year under a new agreement. That was a reduction of 93% and a huge overnight shock to his personal and professional finances.

The average reduction for contracts negotiated by Cellnex UK, as Mark Bartlett informed us on Tuesday, has been 63%—a decrease that would cause a huge dent in the finances of all the kinds of organisation I have referred to and a figure well above what the Government promised in 2017. I am sure that members of this Committee would not be best pleased if a significant stream of their income fell by 63%.

I know that the Minister said at Second Reading that valuations pre 2017 were much too high, but surely she must recognise, after the oral evidence we heard on Tuesday, that the race to the bottom that we are seeing is not sustainable and that the level of reduction in rent that is occurring will deter other landowners from agreeing to host infrastructure in the first place, thus slowing the roll-out that this very legislation is designed to speed up.

Rather than leaving reductions to chance, the Opposition have tabled amendment 8, which would enshrine in law that rents under any new agreement fall by no more than 40%. That would strike a much fairer balance between operators and site providers by ensuring that what is a significant income stream for many individuals and community groups is not wiped out overnight. It would also contribute significantly to a faster roll-out of telecommunications infrastructure, as site owners would be more willing to engage. Speeding up the roll-out of new telecommunications infrastructure is the express desire of the Bill. I hope that Members from across the Committee will stand squarely behind their constituents by supporting this amendment.

Photo of Kevin Brennan Kevin Brennan Llafur, Gorllewin Caerdydd

I rise briefly to support my hon. Friend in pushing the amendment, in order to hear what the Minister has to say in response. The amendment goes to the heart of what a lot of the Bill is about: balancing the rights of private property owners and the policy requirement to speed up the roll-out of digital infrastructure.

This morning we debated an instance in which there would be no real financial cost to the private property owners from doing the right thing. In that instance, the state was ensuring that their properties could be accessed to put in the necessary infrastructure to roll out digital infrastructure in an urban setting—big blocks of flats, where lots of people might not have very good access to the internet and so on. In that instance, the Government were not prepared to accept our amendment, even though it would not have had any significant detrimental impact on the private property owners. In other words, they took the view that in that instance the private property owners, even if they would be only marginally inconvenienced, had to have their property rights protected, because this was a retrospective imposition and they would not have given permission.

In this instance—in fairness, I think this was not intended in 2017—private property owners have suffered, or might suffer, significant detriment to the income they can acquire through somebody else’s use of their land with the state’s assistance. In those circumstances, it is not unreasonable to say that the balance should be to ensure that they are not affected in a way that causes a massive reduction in the income they can earn from the use of their land.

If that was not a strong enough argument in itself, which perhaps it is not, the way the market has reacted to what happened after 2017 and the problems that there have undoubtedly been, with people reluctant to get involved with rolling out the infrastructure we need for the future, which we all want to achieve through the Bill and by other means, is further evidence that an adjustment perhaps needs to be made. The Minister could discuss with the Committee whether that adjustment is exactly what is contained in the amendment, but whether something should be done to address the arguments and concerns that have been expressed to us by those who own land on which such infrastructure is sited is certainly worth further consideration.

Photo of Julia Lopez Julia Lopez Parliamentary Secretary (Cabinet Office), Minister of State

I thank the hon. Members for Ogmore and for Cardiff West for their contributions and for the amendment. I acknowledge that this is a tricky issue. There have been problems between both parties since the 2017 reforms, but we maintain that the 2017 valuation provisions created the right balance between the public need for digital communications and landowner rights. I think there is agreement that the prices being paid for rights to install communications apparatus before that date were simply too high. With digital communications becoming an increasingly critical part of our daily lives, that needed to be addressed.

The new pricing regime is more closely aligned to those for utilities such as water, electricity and gas. We think that that is the correct position. As I said earlier today, we are not seeking to take sides. We are on the side of good digital connectivity for our constituents, and we firmly believe that landowners should still receive fair payments that, among other things, take into account any alternative uses that the land may have and any losses or damages that may be incurred. I was alive to the concerns expressed to me by the Protect and Connect campaign, but also to those raised by individual Members about tricky constituency cases. When I came into my role in September, I met individual Members to discuss those cases. I also met Protect and Connect.

I tested the cases that were brought to my attention and asked for further details, which often were not forthcoming. There was a catch-all excuse that a lot of them were under non-disclosure agreements and the precise amount of rents settled at could not be disclosed. My broad view is that there were initial concerns and difficult cases where the mobile network operators were too aggressive in their negotiations—I think that was effectively acknowledged in the panel discussions earlier in the week—but we seem to have found an equilibrium now, helped partly by some of the cases that have gone through the courts.

We now have a body of case law that can be referred to in some of these tricky negotiations. We are also trying to deter people from going to the courts in the first place, by introducing more alternative dispute resolution mechanisms. I say that to reassure Members. There were problems initially. As far as I can tell from my case load, the correspondence coming in, the discussions that I have had with Members and the lack of additional noise on the subject in the Chamber, a better equilibrium has now been found between the mobile network operators and the landowners. If that is not the case, I am happy to look at those cases again, and we are introducing mechanisms to provide better negotiations between parties via the legislation.

Turning to the amendment, I am not sure why the hon. Member for Ogmore thinks that a specific limit should be imposed on the percentage by which rent can be reduced when the rental payment is determined by a court. Further, it is unclear why he has chosen arbitrarily to apply a figure of 40%. We have strongly resisted specifically regulating the amount of rent payable under a code agreement. Our preference has been to allow the parties to freely negotiate the amount payable under an agreement, based on a statutory framework either in the code, the Landlord and Tenant Act 1954 or the Business Tenancies (Northern Ireland) Order 1996. Even where the parties cannot reach an agreement and the court has to impose its terms, including the rent to be paid, the court has the freedom to reach its own conclusions using that framework, rather than having its discretion restricted by statutory rent controls. As I said, my understanding is that we now have a much better equilibrium, in that we have amounts of rent that both parties are much more content with.

I understand the concerns about whether this has stymied roll-out. If operators cannot get their infrastructure on to land, I imagine that they would start paying more to try to incentivise landowners to take it on. I think we have also seen cases where it has been in the landowner’s interests to try to drag the process out so that they are on the old rents, rather than the reduced, new rents. I think that has also contributed to some of the delays.

If the amount of rent is controlled in the way suggested in this amendment, we will be heading closer to a regime that will apply reductions on a blanket basis, rather than take into account the broader range of relevant circumstances, as permitted by the legal framework. I suspect that that is something that both site providers and operators would be keen to avoid.

I am aware that it has been alleged that the Government expected rents to fall by in the region of 40% following the 2017 reforms. It is unclear whether it is on that basis that the hon. Member for Ogmore chose the statutory cap of 40% in his amendment. At the time of the 2017 reforms, which I confess predate me, the fact is that the Government were unsure what the level of rent reductions would be. We were clear that that was the case. Independent analysis contained in the impact assessment that accompanied those reforms predicted that reductions could be 40%, but that was never a Government prediction nor a target.

Photo of Chris Elmore Chris Elmore Opposition Whip (Commons), Shadow Minister (Digital, Culture, Media and Sport)

I did say in my opening remarks where the 40% comes from. Just to help the Minister, it does relate to the 2017 change, but also the Government’s own analysis from the time. I do of course accept that she was not the Minister, but her party was in government, and those are her own Government’s figures.

Photo of Julia Lopez Julia Lopez Parliamentary Secretary (Cabinet Office), Minister of State

That certainly is a fair point to make, and I apologise for not picking that up in the hon. Member’s comments.

A cap is likely to be even more detrimental to constituents in rural communities, who will benefit from the increased connectivity and reliability that we hope the Bill will bring.

As I have explained, agreements to which the code applies can currently be renewed in various ways, depending on the type of agreement and where in the UK it was entered into. The intention of clause 61, along with clause 62, is to create a clearer and more consistent legislative framework under which agreements are renewed. Central to that is ensuring that, no matter where in the UK an agreement is renewed, the financial terms are calculated in the same way. That will help to ensure that there is not a digital divide across the UK, with one country receiving additional investment at the expense of others because operating costs are cheaper.

The amendment suggests limiting any reduction in rent that may be imposed by the court when agreements are renewed under the 1954 Act. While that proposal is well intentioned, we do not believe that it should be allowed to proceed. It is vital that there is fairness throughout the UK. The Bill as drafted provides a clear framework, which will not only result in all payments being calculated in the same way, but in the ability to renew agreements quickly and cost-effectively. We think that will expand the digital network.

Photo of Kevin Brennan Kevin Brennan Llafur, Gorllewin Caerdydd

I take what the Minister said about the figure of 40%, but it was contained, as my hon. Friend the Member for Ogmore said, in a previous Government’s impact assessment. I remind her that, when Ministers issue impact assessments, they sign them, as she did with this one, saying:

“I have read the Impact Assessment and I am satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impact of the leading options.”

When her predecessor signed the impact assessment on behalf of the Government to say, “This is the Government’s official view of what is likely to happen,” their official view was that rents would drop, probably by 40%.

Photo of Julia Lopez Julia Lopez Parliamentary Secretary (Cabinet Office), Minister of State

I accept the point that the hon. Gentleman is making. I also accept that in some cases rent reductions were much greater than expected. As we discussed earlier in the week, some of those were the result of overly aggressive behaviour by mobile network operators. We need to address some of the challenges that were raised by some of the changes that were made. In the body of case law, we now have a better equilibrium between landowners and operators, which should help to address some of those cases.

On some of the more emotive cases that have been raised with me over my tenure, I have sought to understand the details. Those cases are not always as has been presented, and I am led to believe that, in terms of a lot of the initially very difficult cases that came after the 2017 reforms were initially introduced, we are now in a very different place.

It is vital that there is fairness throughout the UK. As drafted, the Bill provides a clear framework that will not only result in all rental payments being calculated in the same way, but in the ability to renew agreements quickly and cost-effectively. We hope that will help us expand the digital network across the whole of our country. In those circumstances, I ask the hon. Member for Ogmore to withdraw his amendment.

I will now turn to clauses 61 to 65, which deal with the renewal of agreements to which the code applies that have expired or are about to expire. There are several ways in which such agreements can be renewed, depending on the type of agreement and where in the UK it was entered into. The aim of the clauses is to make all the routes to renewal as clear and consistent as possible, so that the process is the same across the UK.

When agreements to which the code applies come to an end, it is important that there is a clear legislative framework in which their renewal can be negotiated and any disagreements dealt with. Making sure that renewal can be completed quickly and consistently not only provides certainty for all parties, but may deliver real benefits for consumers. Renewing such agreements ensures that operators can optimise their use of existing sites to provide greater network capacity and increase access to 5G services.

In England and Wales, there are two statutory routes to renewing the agreements. The first is in part 5 of the code and applies, for example, to most new agreements entered into since the code came into force on 28 December 2017; the other is set out in part II of the Landlord and Tenant Act 1954. Clause 61 applies specifically to agreements that are to be renewed under the second statutory route—that is, under part II of the 1954 Act.

Importantly, the two statutory routes contain different provisions relating to the financial terms of any renewal agreement imposed by a court. Under part 5 of the code, the amount that an operator is required to pay for rights to use private land is calculated on a no-network basis and the fact that the land will be used to host telecoms apparatus cannot be taken into account in assessing the amount to be paid by the operator. In effect, telecoms operators cannot be charged more than anyone else wishing to use the land would be. We think that that is the correct approach and should apply to all agreements to which the code applies.

That valuation framework is not currently available under the 1954 Act, so the no-network assumption does not apply and operators renewing agreements under that statutory route may be required to pay more than they would had part 5 of the code applied. We think the different outcomes are unfair, so the provisions in clause 61 extend the statutory valuation framework in the code to renewal of agreements under part II of the 1954 Act. We think that will result in fairer outcomes and ensure that the financial terms of all agreements to which the code applies that are completed or renewed after the Bill comes into force reflect the same valuation principles.

Clause 62 makes equivalent provision for agreements in Northern Ireland that were entered into before 28 December 2017 and are to be renewed under the Business Tenancies (Northern Ireland) Order 1996, not under part 5 of the code. That will ensure that the same valuation principles underpin the renewal of all agreements to which the code applies across the UK.

The statutory valuation regimes under the 1954 Act and the 1996 order deal solely with the assessment of the rent or the price that an operator is required to pay to keep its apparatus on the land. That is not the only sum a landowner can claim where an agreement is instead renewed under the code, as the code also makes provision for a landowner to recover compensation for any loss or damage that may result from the code agreement. This ensures that landowners are not left out of pocket and can recoup the costs they incur as a result of having telecoms apparatus on their land. There is no equivalent right to compensation in either the 1954 Act or the 1996 order. Clauses 63 and 64 therefore extend the rights of landowners to claim compensation under those provisions.

I hope the Committee will agree to these clauses standing part of the Bill.

Photo of Chris Elmore Chris Elmore Opposition Whip (Commons), Shadow Minister (Digital, Culture, Media and Sport) 2:15, 17 Mawrth 2022

I listened to the Minister’s remarks, and she acknowledges some of the historical cases, but I refer her to this Committee’s first sitting, where I asked Eleanor Griggs of the National Farmers Union about reductions in recent cases. Ms Griggs said that in in recent times, the NFU had made representations in cases in which farmers had received 90% decreases. Later, she referred to a farm in the constituency of the hon. Member for St Austell and Newquay where there was a significant reduction, from £3,500 to £17.50 a year.

We have to acknowledge the impact on many organisations, including farmers, churches, and particularly community groups. I have examples in my constituency of community groups that run scout halls or guide huts losing 60%, 70%, 80% or 90% of the income they use to balance their budgets and ensure that they can run services for children and young people throughout the year. The Minister has committed to review even more of the cases that come through for her personal intervention, but I think there should be a minimum threshold of 40%, which the Government committed to previously in their impact assessment, as my hon. Friend the Member for Cardiff West pointed out. I am therefore not minded to withdraw the amendment. I also hope that their lordships will consider it as part of any future scrutiny in the other place.

Question put, That the amendment be made.

Rhif adran 6 Product Security and Telecommunications Infrastructure Bill — Clause 61 - Rent under tenancies conferring code rights: England and Wales

Ie: 4 MPs

Na: 7 MPs

Ie: A-Z fesul cyfenw

Na: A-Z fesul cyfenw

The Committee divided: Ayes 4, Noes 7.

Question accordingly negatived.

Clause 61 ordered to stand part of the Bill.

Clauses 62 to 65 ordered to stand part of the Bill.