Product Security and Telecommunications Infrastructure Bill — House of Lords, 2022-06-29
Topic: Housing
John Lytton (Crossbench, Unknown): I am indeed. I believe that one of the firms is based in San Diego, in California. One cannot help supposing—I think this is the sentiment in the market—that the driving down of rental figures has been part and parcel of what is actually a very substantial land deal to sell a package based on the profit rent that can be derived. But the crucial thing here is that there does not appear to be any reason why these aggregators—or for that matter the site companies or mast companies—should pass on any of the savings to the network operator and make it cheaper or more competitive for those of us who actually use the service. That is one area where there is a significant disconnect. These things are noted by those who are acting for owners or by the owners themselves The intention really is to get some sort of fairness. I understand that, and do not dispute the question of getting a fair balance. However, I am worried that this is beginning to put things into the hands of commercial entities—the aggregators are no different—that may be benefiting from code rights but do not necessarily have the code obligations to deliver for society. I wonder whether these entities are going to end up doing some sort of site-squatting operation, where they tie up as many of the sites as they possibly can, rather in the same fashion as residential property developers might option up bits of land on the outskirts of villages. That would worry me, because it would mean that a cadre of middlemen would effectively be holding things to ransom. I will get on to why that matters in valuation terms in a minute The land valuation solution espoused by the communications code and strengthened in this Bill, in terms of having changed from market value to something that looks and feels a bit like existing use value, is, I am afraid to say, the philosophical equivalent of two cans of beans connected by a bit of slack string. It is a very unsophisticated approach for dealing with the land issue which underpins the whole of what we are talking about in the rollout of better 4G and of 5G—both of which I support for the reasons I made clear earlier I will move to an overview of the amendments. Amendments 20 and 22 to 27 aim to address the issues of valuation, pure and simple, which is one of the most significant concerns with the Electronic Communications Code. Under the changes the code made in 2017 was the introduction of the no-network valuation methodology for valuing land, which allowed site providers to recover only the raw value of the land rather than receiving a market price. A new line was inserted into the code so that, when setting a site value, the court was prevented from taking into account a site’s potential use for the provision of an electronic communications network. This is notwithstanding that the Electronic Communications Code itself has a reference to market value at paragraphs 24(1) and (2) and sets out in sub-paragraph (2) the criteria—which I understand, as somebody dealing with valuations in terms of the standard RICS specification; the wording is familiar—but then inserts at sub-paragraph (3) a provision relating to the court’s jurisdiction which negates this. Market value has an internationally recognised definition: it is the price one might reasonably expect in an arm’s-length transaction, following proper marketing, between a willing buyer and willing seller, in which the participants act "knowledgeably, prudently and without compulsion" To include this definition in one part of the code but then to say in the bit that immediately follows that the court must disregard significant parts of it is, in linguistic and market terms—even if not in valuation practice statements—simply incoherent. There is no conceivable middle ground here. It is one thing or the other: remove one leg of the definition and the entire proposition unravels. Effectively, we are left with existing use value, which is not a useful or defined metric so much as a state and condition of land, normally only ever used in taxation and accounting for certain local authority assets At the same time, another change was made to the code’s valuation provisions to ensure that site owners could not charge ransom rents. Any valuation must assume that there is another site available to operators so that there is no monopoly in land provision around any site. This change was recommended to the Government by the Law Commission. It is quite an important one. It may be that legal minds can conceive of free markets in which the economics of supply and demand are simultaneously applied and negated, but you cannot then leave the free market to sort it out. It does not happen. It cannot happen, because you have just trashed the open market system I thank the Minister for the online meeting we had before Committee. Some mechanism for pegging rents, which I meant to mention, or else some other surrogate comparator, seems to me to be necessary. In the Rent Acts, when there was rent control and security of tenure, there was a person called the rent officer who was supposed to fix the rents on the basis that it was devoid of scarcity. To a degree, that worked. However, as the situation arose, the market, following the introduction of the Rent Acts in 1965, effectively imploded and collapsed. The law can state that one thing means another—that "chair" shall mean "table" and vice versa—but no lawyer in the land is going to alter their respective functional characteristics, nor in the real world of furniture sales will a buyer looking for a traditional chair be satisfied with getting a table instead. So we really need to sort it out In the other place, the Minister recognised that rent reductions have been much greater than expected—I do not know whether he admitted that this was the fault of aggressive behaviour by operators. This affects a wide variety of small businesses and others that we heard about at Second Reading and in the previous Committee debate. On the situation today, it seems to me that the Bill will make it easier to go to court while preserving the same valuation regime. As the Law Society said, this appears to be addressing the symptoms rather than the causes Plus, it skews the negotiations. If you make it easier for somebody to go to court and that becomes the default, what happens? The more powerful economic party rules it over the less powerful. You do not get equality before the law; you depart even further from a fair market position. Although provisions exist for alternative dispute resolution, there is in fact little or no compulsion for operators to use this, so they default to more costly alternatives, which are of course naturally seen as preferable to anybody aggressive and well-funded. The whole question of ADR can always be sidestepped on the basis that some point of law is at stake or the lessor has jibbed at the "take it or leave it" proposal put to them. It is very easy to avoid ADR in the majority of circumstances The Government said they were not going to revisit the valuation regime introduced in the 2017 reforms, but the Bill actually expands the no-network valuation regime into approximately 15,000 agreements governed by the Landlord and Tenant Act 1954 and the Business Tenancies (Northern Ireland) Order 1996. This will allow existing contractual agreements entered into in good faith to be dramatically changed. Bear in mind that rent is merely the financial end-product of a deal involving many covenants, conditions, undertakings and other criteria. The filleting out of consideration on the one hand from compensation on the other, demanding as it does the quantification of many interrelated, non-priced elements, is, I am afraid to say, a very suspect practice.