With poor returns affecting all agricultural sectors, farmers are looking to see if more money can be made from land let to telecom providers by requesting a rent review. Ryan Warman from Carver Knowles explains the different rent review mechanisms that are available and whether farmers should request a review or remain silent.
Rent reviews typically occur every 3 to 5 years, often at the request of the landowner. Before requesting a review it is first essential to look at key sections of the lease agreement to identify how the rent is calculated.
The starting point for the rent will usally be based on the core volume of network traffic that passes through the service mast. There are two methods that network providers use to calculate rents which include;
- Retail Price Index (RPI)
- Open Market Value rise
Retail Price Index (RPI)
If your rent is calculated via the Retail Price Index the rent will be affected in accordance with any increases in the RPI. This means that the rent will be linked to inflation. It is likely that if a review coming up or has passed, a rental increase is due.
Open Market Value rise (OMR)
The second type of rent calculation is using Open Market Comparables. Greenfield sites can largely vary across the country between £3,500 to £7,000 p.a. The amount of rent largely determined by the amount of core network traffic that passes through its transmitters. In short, the more volume of data, the higher the rent.
In recent years network operators have been collaborating their services and ‘sharing’ service masts to reduce ground rents. This has seen may OMV leases decrease as a result. In this instance, it would be in the landowners interest to not request a rent review if it is believed the level of rent is likely to decrease.
Your negotiating position will also depend on the duration remaining on lease and any upcoming break clauses as if a lease is coming to end it is often best to receive a lower rent in an attempt to losing the operator to another site.
Other Heads of Terms that need to be considered include the availability for the operator to sublet and any provisions for Alienation and Alterations contained in the lease agreement.
If you would like further information regarding this article, please feel free to contact Ryan or another member of the team who will be pleased to assist you.