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Horizon Scanning | UK Real Estate 2019 

New Telecoms Code and the "human right to mobile telephony"

It is only in recent months that judgments on the new Electronic Communication Code (the “Code”) have started to emerge from the Upper Tribunal (which now decides telecoms disputes).  They confirm what many businesses and individuals have sensed over the last year; that what has been referred to by the Tribunal as “the human right to mobile telephony” is likely to trump the human right to enjoyment of one’s own property.  The new Code came into force on 28 December 2017 making it much easier for telecoms operators to acquire rights to install and maintain electronic communications equipment on, under or over land.  In the absence of reaching agreement with the relevant landowner, an operator has the right to apply to the Upper Tribunal for an “enforced agreement”. 

Telecoms Code
The operators are under immense pressure to get equipment in place to ensure the successful launch of 5G.  Whilst no one wants a mobile phone mast on the office they are trying to redevelop, or next to their house, people demand ever faster internet connections and uninterrupted phone coverage. Proptech firm WiredScore, a global rating scheme for commercial real estate digital connectivity, has just had another successful funding round.  With increased data on connectivity becoming the norm, it seems inevitable landlords will be under even greater pressure to deliver well-connected buildings.  With this as the backdrop, landowners should not be surprised to receive more frequent requests from operators prospecting for suitable sites for their equipment. 
 
The judgments of the Tribunal to date have included the grant of interim rights under the Code in the form of a lease in favour of the operators, together with rights to carry out surveys to establish if a site is suitable for the installation of equipment. The Tribunal has to consider:
 
  • whether the prejudice caused to the landowner can be adequately compensated for in money; and
  • if the public benefit likely to result from making such an order outweighs the prejudice to the landowner.  
With interim rights, these tests only need to be proved to the standard of a “good arguable case”.  

Another point that the new Code has clarified is that there will be no duplication of security of tenure.  As long as the primary purpose of an agreement is to grant Code rights, the termination provisions under the Code will apply and not the Landlord and Tenant Act 1954. This reduces confusion between two incompatible regimes, but still leaves landowners having to give 18 months’ notice to operators to remove equipment.

Set against some aspects becoming clearer, the Government has just commenced a Consultation to amend the new Code to grant further powers to operators. It is aimed at situations where a tenant wants full fibre connectivity, but the operator cannot provide it because landlord’s permission is required to cross the landlord’s land. Currently an operator would need to have permission in a wayleave or access agreement, but the proposal is that, going forward, there will be an obligation on landlords to facilitate access to their properties once properly notified, and furthermore, if access is not allowed after two months, operators will have the right to apply to a Magistrates Court for a “warrant of entry” to lay the relevant cable. 

A formal “agreement” would follow either by negotiation of the parties or determination of the Tribunal.  How already frustrated landowners might react when faced with a warrant from the Magistrates Court remains to be seen: at the least landowners need to be aware of the procedures and timings imposed by the Code and that burying their heads in the sand is not an option.

Brexit 

Ever since the unexpected referendum result in 2016, the nation has been in a curious state of befuddlement and limbo. The process surrounding the UK’s departure from the EU has been enveloped by a dense and numbing political fog, punctuated by seemingly erratic whirlwinds of frenetic activity. Progress as to the terms of our exit - and future relationship - appears simultaneously to stand still, reverse and speed up. But, with approximately three months to go until 29 March 2019, the storm shows no sign of abating yet – if the last few weeks are anything to go by … that said, we can still usefully look at what, if any, progress has been made this year - and what effect this has had on the real estate market.

"The process surrounding the UK’s departure from the EU has been enveloped by a dense and numbing political fog"

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Retail Insolvencies 

In the 12 months ending Q3 2018, the wholesale and retail trade sector saw the second highest underlying of new company insolvencies in the UK with a number of household names dramatically reducing their real estate footprint or disappearing altogether. Casual dining and fashion have been particularly affected, with the number of CVAs for Q3 2018 rising by 200% compared with the same period in 2017.  

"The number of CVAs for Q3 2018 rising by 200% compared with the same period in 2017"

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Overseas Investors 

In recent years, an increasing number of jurisdictions across the globe have either introduced new or strengthened existing rules controlling foreign investment: the UK is no exception and the trend for even greater transparency in UK real estate has continued, especially where overseas investors are involved, driven by the UK Government’s wider push to tackle corruption. Here we look at a number of the key changes which overseas investors in UK real estate need to be aware of; the likely impact of those changes and the reaction from overseas investors so far.

"$13.7 billion of overseas capital piled into the City in 2018 attracted by favourable occupancy rates, dependable investments with yields higher than elsewhere in Europe.” (Cushman & Wakefield: Winning Growth in Cities)

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New Telecoms Code

It is only in recent months that judgments on the new Electronic Communication Code (the “Code”) have started to emerge from the Upper Tribunal (which now decides telecoms disputes). They confirm what many businesses and individuals have sensed over the last year; that what has been referred to by the Tribunal as “the human right to mobile telephony” is likely to trump the human right to enjoyment of one’s own property. The new Code came into force on 28 December 2017 making it much easier for telecoms operators to acquire rights to install and maintain electronic communications equipment on, under or over land. In the absence of reaching agreement with the relevant landowner, an operator has the right to apply to the Upper Tribunal for an “enforced agreement”.

"The human right to mobile telephony is likely to trump the human right to enjoyment of one’s own property"                                                                 

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Tax Update 

What are the UK tax questions that matter most to the real estate sector? How will we be taxed on our income and gains, how much SDLT will we need to pay and what capital allowances are available are invariably near the top of the list. At least for some investors, the answers to all of these will be changing over the next couple of years. Add to this a new 2% digital services tax that will apply regardless of physical presence and there is plenty to think about following the 2018 Budget.

"As previously announced, the taxation of non-UK residents in relation to UK property is to be fundamentally changed"

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Regeneration

Urban regeneration is at a turning point. Even in our present polarised political climate, few would deny that there is a problem with housing capacity and affordability in the UK. Acknowledging the problem is, seemingly, the limit of the consensus. Perhaps one more thing is certain: private developers are inherently a key part of the solution.

"Genuine engagement with residents and other local organisations and institutions early in the development process is crucial"

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Prop Tech

From online estate agents to smart buildings, PropTech is infiltrating the real estate sector in many different ways; in some cases seeking to replace antiquated and inefficient systems and in others introducing new technologies to drive forward an industry that has traditionally been resistant to change. Few Real Estate professionals, whether millennials or baby boomers, would deny that PropTech is changing the Real Estate industry.

"Experts are predicting that technology will play an increasingly prominent role in how occupiers use and operate their Real Estate"

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Explore further topics across our UK Real Estate | Horizon Scanning 2019 publication.

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