Jeremy's Blog 14th January 2022: Mast Rents and Premiums
This article by Jeremy Moody first appeared in the CAAV e-Briefing of 13th January 2022.
A court has awarded a rent of £3,500 for a rural mast on the renewal of a Landlord and Tenant Act 1954 lease. This recognised the widespread use by operators of “Early Completion Incentive Payments” (ECIPs) as tantamount to premiums – the court required their disclosure.
As a renewal of a lease protected by the 1954 Act to be a Code agreement, the case (Pippingford (EE Limited v Morriss  EW Misc I (CC))) was heard in the county court by the Upper Tribunal’s Martin Rodger for his Code disputes experience. While the rent was to be set under 1954 Act’s s.34 rather than directly under paragraph 24 of the Code, it was “in the shadow of the Code”, if without the Code’s “no-network” assumption. Ultimately, there could be recourse to the Code.
Anxious to work from comparative market evidence rather than build up a valuation (as in Hanover Capital and Dale Park):
“If sufficient evidence of those rents is available there should be no need to report to other valuation approaches”.
The court found it had the transactions evidence to do this and that:
“it is essential to be aware of all the features of the comparable transaction”.
While the operators insisted that ECIPs were irrelevant “inducements” to be ignored and withheld evidence about them, the court ordered their disclosure which:
“cast many of the transactions … in a rather different light”.
“Capital payments are now almost invariably paid to site providers … a core component of the financial package”. In the real world, their labels are “window dressing”. New lettings with rents of £250 had ECIPs of £15,000 that were important, not to be hidden from the court.
The court found that where no payment was made for a new lease, the rents agreed were £2,250. ECIPs saw lower rents but upfront payments equating to an annual £1,750-£2,500 as well as a contribution to the site provider’s fees.
Assessing the rent that would be agreed for this site alongside a capital payment as £1,200, the court found that turning a typical premium into a rent paid over time brought that to around £3,000 which with a contribution for professional fees, some site-specific, gave a rent of £3,500.
The court has seen that ECIPs are part of the real world for mast site agreements, required their disclosure and taken them into account with an outcome not unlike the 40 per cent reduction a report to DCMS had first suggested.