12 Jan 2018
Our professionals should be aware that there's been an update to the Electronic Communications Code. This revised code operates on the basis that code rights should continue to be acquired by agreement wherever possible, backed up by a code of practice to underpin the objective of parties acting reasonably.
The Electronic Communications Code (ECC) also continues the concept of consideration, this being the market value of the “relevant person’s agreement to confer or be bound by the code right (as the case may be)”.
In terms of potential conflict with the RICS Valuation-Professional Standards (Red Book), both primary and secondary legislation take precedence and so valuations can be provided in accordance with/having regard to the code without involving any departure from the Red Book (PS 1 Section 4 Paragraph 4.1 and PS 1 Section 6 Paragraph 6.3).
"Market value" under the code (when it comes to imposition of an agreement) differs from market value as defined in VPS 4 Section 4 to the extent that certain prescribed assumptions have to be made.
The fact that the code defines the basis of value to be used in this way is not an issue. The key point for RICS professionals is that you have to bear in mind that strictly the "asset" for this purpose is the "relevant person's agreement to confer or be bound by the code right (as the case may be)". In relation to that, it is generally better to tie matters back to the legislation i.e. to the code itself.
Additionally, the new code gives power to the courts to order payment of compensation, where appropriate. The valuation basis is found at Paragraph 24 and the compensation elements at paragraph 25 & 84 within the new ECC.
Valuation detail to note
RICS, through our expert Telecoms Forum, will continue to monitor the situation and contribute to HM Government (DCMS) policy deliberations and consultations.
Our professionals should make particular note of the following valuation specific sections of the ECC as outlined below:
24. How is consideration to be determined under paragraph 23?
- The amount of consideration payable by an operator to a relevant person under an agreement imposed by an order under paragraph 20 must be an amount or amounts representing the market value of the relevant person’s agreement to confer or be bound by the code right (as the case may be).
- For this purpose the market value of a person’s agreement to confer or be bound by a code right is, subject to sub-paragraph (3), the amount that, at the date the market value is assessed, a willing buyer would pay a willing seller for the agreement—
(a) in a transaction at arm’s length,
(b) on the basis that the buyer and seller were acting prudently and with full knowledge of the transaction, and
(c) on the basis that the transaction was subject to the other provisions of the agreement imposed by the order under paragraph 20.
- The market value must be assessed on these assumptions—
(a) that the right that the transaction relates to does not relate to the provision or use of an electronic communications network;
(b) that paragraphs 16 and 17 (assignment, and upgrading and sharing) do not apply to the right or any apparatus to which it could apply;
(c) that the right in all other respects corresponds to the code right;
(d) that there is more than one site which the buyer could use for the purpose for which the buyer seeks the right.
- The terms of the agreement may provide for consideration to be payable—
(a) as a lump sum or periodically,
(b) on the occurrence of a specified event or events, or
(c) in such other form or at such other time or times as the court may direct.
25. What rights to the payment of compensation are there?
- If the court makes an order under paragraph 20 the court may also order the operator to pay compensation to the relevant person for any loss or damage that has been sustained or will be sustained by that person as a result of the exercise of the code right to which the order relates.
- An order under sub-paragraph (1) may be made—
(a) at the time the court makes an order under paragraph 20, or
(b) at any time afterwards, on the application of the relevant person.
- An order under sub-paragraph (1) may—
(a) specify the amount of compensation to be paid by the operator, or
(b) give directions for the determination of any such amount.
- Directions under sub-paragraph (3)(b) may provide—
(a) for the amount of compensation to be agreed between the operator and the relevant person;
(b) for any dispute about that amount to be determined by arbitration.
- An order under this paragraph may provide for the operator—
(a) to make a lump sum payment,
(b) to make periodical payments,
(c) to make a payment or payments on the occurrence of an event or events, or
(d) to make a payment or payments in such other form or at such other time or times as the court may direct.
- Paragraph 84 makes further provision about compensation in the case of an order under paragraph 20.
84 . Compensation where agreement imposed or apparatus removed
- This paragraph applies to the following powers of the court to order an operator to pay compensation to a person—
(a) the power in paragraph 25(1) (compensation where order made imposing agreement on person);
(b) the power in paragraph 44(5) (compensation in relation to removal of the apparatus from the land).
- Depending on the circumstances, the power of the court to order the payment of compensation for loss or damage includes power to order payment for—
(a) expenses (including reasonable legal and valuation expenses, subject to the provisions of any enactment about the powers of the court by whom the order for compensation is made to award costs or, in Scotland, expenses),
(b) diminution in the value of the land, and
(c) costs of reinstatement.
- For the purposes of assessing such compensation for diminution in the value of land, the following provisions apply with any necessary modifications as they apply for the purposes of assessing compensation for the compulsory purchase of any interest in land—
(a) in relation to England and Wales, rules (2) to (4) set out in section 5 of the Land Compensation Act 1961;
(b) in relation to Scotland, rules (2) to (4) set out in section 12 of the Land Compensation (Scotland) Act 1963;
(c) in relation to Northern Ireland, rules (2) to (4) set out in Article 6(1) of the Land Compensation (Northern Ireland) Order 1982 (SI 1982/712 (NI 9).
- In the application of this paragraph to England and Wales, section 10(1) to (3) of the Land Compensation Act 1973 (compensation in respect of mortgages, trusts of land and settled land) applies in relation to such compensation for diminution in the value of land as it applies in relation to compensation under Part 1 of that Act.
- In the application of this paragraph to Scotland, section 10(1) and (2) of the Land Compensation (Scotland) Act 1973 (compensation in respect of restricted interests in land) applies in relation to such compensation for diminution in the value of lands it applies in relation to compensation under Part 1 of that Act.
- In the application of this paragraph to Northern Ireland, Article 13(1) to (3) of the Land Acquisition and Compensation (Northern Ireland) Order 1973 (SI 1973/1896(NI 21)) (compensation in respect of mortgages, trusts for sale and settlements) applies in relation to such compensation for diminution in the value of land as it applies in relation to compensation under Part II of that Order.
- Where a person has a claim for compensation to which this paragraph applies and a claim for compensation under any other provision of this code in respect of the same loss, the compensation payable to that person must not exceed the amount of that person’s loss.
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