13 March 1999

MAKeA MINT OUT OF MASTS

Telecom mast sites are needed throughout the UK. Should you plant one on your land? Henry Barney of property consultants Samuel Rose looks at the potential profit – and the pitfalls.

RENTAL income from letting space to a telecommunica-tions mast site is a welcome source of non-agricultural income in these times of falling farming returns.

Growers could expect to see a return of between £1,500-£5,000 a year, depending on the location, for allowing telecommunications equipment onto their land.

Demand for suitable sites is still high since new masts are needed to enable new operators to create a network, and for existing operators to improve coverage. The operators who use these masts are regulated by the Telecommunications Act 1984, and are issued licences.

Competition is strong between the leading market players at the moment and, with the Government about to issue more licences to new and existing operators, demand for sites will continue to grow.

However, planning permission is required, and legislation is tightening its grip on mast sites. At present, masts of under 15m are dealt with in a similar way to small agricultural buildings on a prior notification basis.

This involves the operator informing the local planning authority of its intentions. The authority then has a limited time in which to respond.

The Government proposes to alter the general development order in an effort to restrict unnecessary and unsightly mast construction.

Further restricting the construction of new masts will force operators to share sites. This makes it all the more important that the lease should protect the landlords right to future income from other operators.

Alternatively, operators are seeking existing structures on which they can attach their equipment, and Vodafone have an agreement with National Grid over the use of pylons. In this situation, the site owner will still be paid by the National Grid as well as the mast operator.

New designs

In an attempt to placate the planners, operators are coming up with some interesting designs for new masts. Transparency of design to blend with the existing landscape is encouraged. Orange have even developed a mast disguised as a tree.

Unfortunately, although demand for sites is still high, the individual requirements of the operator dictate selection. Moreover, they are inclined to deal with geographical areas in turn. Promoting your land by sending a plan of the whole holding, although seldom successful, is still worth a try. Topography is not the only issue, and so the top of a hill is not the only requirement.

When promoting your land as a possible mast site, it is essential to differentiate between first, the operators themselves taking leases on sites and second, companies, which act essentially as middlemen, taking leases or even options on sites.

The latter tend to offer less favourable terms, in order that they may have a slice of the cake. Furthermore, although it may be possible to find the end user directly, telecommunication companies are often unwilling to by-pass the middleman, if they have already made an agreement with them.

Property companies, acting essentially as investors, are buying options on sites and putting together portfolios to offer to new operators as the industry, is further deregulated by the issue of more licences. In particular, foreign companies are trying to break into the UK market and a portfolio of guaranteed sites with no negotiation will look very attractive.

Granting an option in this situation will normally only yield a small one-off payment with no ongoing income until the site is let.

Direct approach

If you are fortunate enough to have what may be a suitable site, you will probably be approached direct by an agent for, or an employee of, the prospective lessee.

They will offer you terms subject to planning and these may fall well short of the potential.

In addition to the critical question "how much?" you should pay particular attention to the detail of the terms relating to the following areas:

&#8226 Term and break clauses

&#8226 Rent review (frequency and method of calculation)

&#8226 Site sharing and sub-letting

&#8226 Access

&#8226 Future development potential of the site

&#8226 Re-instatement and schedule of condition

&#8226 Premiums and early access payments

Siting and landscaping should be considered in relation to the running of the farm and any potential residential amenity loss.

While this sort of income seems like a bonus, considering the small loss of land, it is no less important to pay attention to the detail of the agreement. The lessee should pay your agents and legal fees, and it pays in the long term to seek professional advice.

&#8226 Henry Barney is a director of Northampton-based rural property consultants, Samuel Rose. Tel: 01604 782700.