Tenancy renewals ruling favours landowners more than telcos

Out-Law News | 05 Feb 2021 | 9:36 am | 5 min. read

Land owners will welcome a new ruling that limits the extent to which telecoms operators can obtain enhanced rights in relation to their property when renewing a legacy tenancy agreement, an expert in property dispute resolution has said.

Joshua Black of Pinsent Masons, the law firm behind Out-Law, said, though, that the judgment of the Court of Appeal in England and Wales is the latest in a string of decisions that telecoms operators would say demonstrate problems with the functioning of the Electronic Communications Code (the Code).

The Code, which came into force on 28 December 2017, governs the relationships between site providers and operators of electronic communications services licensed by Ofcom. It gives operators certain rights to install, inspect and maintain electronic communications apparatus including masts, cables and other equipment on public and private land, even where the operator cannot agree the necessary rights with the site provider.

The Code superseded the 2003 Code, with the purpose of the new Code being to make it easier and cheaper for telecoms operators to roll-out next generation digital infrastructure deemed to be vital to the UK's future economic growth. Amongst other things, the Code restricts the ability of landowners to charge premium prices for the use of their land by requiring the rent to be determined by reference to market value subject to certain assumptions, including a "no network" assumption and the diminution in the underlying value of the land.

Transitional provisions are included in the Code to ensure that operators and site providers that benefited from rights under the 2003 Code can enjoy a degree of continuity. Those transitional provisions were considered in this case before the Court of Appeal.

Cornerstone Telecommunications Infrastructure Limited (CTIL), a joint venture company formed by Vodafone and Telefonica, previously unsuccessfully applied to the Upper Tribunal (Lands Chamber) to renew rights in respect of a rooftop mast site in Birmingham, which had been transferred to it from Vodafone. The Vodafone lease was signed in 2002, and was governed by the Landlord and Tenant Act 1954 (the 1954 Act).

At first instance, Martin Rodger QC, deputy president of Tribunal found that CTIL was not entitled to seek a new agreement under Paragraph 20 of Part 4 of the  Code. The Code provides that a right in respect of land may be acquired by an operator "by an agreement between the occupier of the land and the operator". If the operator is unable to reach agreement with the occupier of the land or another "relevant person", the court may impose either an agreement to confer Code rights on the operator or to bind the relevant person. 

Rodger said the Tribunal had no jurisdiction under Part 4 of the Code to impose a Code agreement on an operator and a landowner where the operator is in occupation of the land under a subsisting agreement. He also held that, where an operator is in occupation of land under a tenancy governed by the 1954 Act, that operator cannot rely on Part 5 of the  Code to obtain a new tenancy. Part 5 of the Code is concerned with the termination and modification of Code agreements and with the renewal of Code rights.

Rodger said that the only way for an operator that is an occupier of land under a lease protected by the security of tenure provisions of the 1954 Act to obtain a renewal under Part 5 of the Code is by first seeking a new tenancy under the 1954 Act and then waiting for the provisions on termination under the new agreement to be triggered before seeking renewal under Part 5 of the Code.

Considering CTIL's appeal against those findings, the Court of Appeal endorsed Rodger's view.

It reiterated its previous decision, outlined in in the case of CTIL v Compton Beauchamp Estates, that only the 'occupier' of relevant land can confer rights under the Code on an operator, and that if the operator itself is considered the occupier then it is barred from conferring the Code rights on itself. The UK Supreme Court is set to consider the question of who should be considered the 'occupier' of land later this year in an appeal raised in the CTIL v Compton Beauchamp Estates case.

In this case, the Court of Appeal dismissed CTIL's argument that it was entitled to renew its existing 1954 Act tenancy under the Code as the operator could not be said to meet the criteria for renewal rights under Part 5 and the transitional provisions under the Code clearly provided such tenancies were to be renewed under the 1954 Act and not under the Code.

In this regard, the Court of Appeal also suggested that whether there is an agreement in writing is relevant to determining whether a subsisting agreement is in place.

"In general where an operator holds under an existing written agreement, it is entitled to apply to renew that agreement under part 5 of the Code," said Lord Justice Lewison in his leading judgment for the court. "The only express exception is where the operator holds under a lease which entitles it to apply to renew under Part II of the 1954 Act. If the primary purpose of the lease was to grant Code rights, then after the first renewal, the new lease will fall within the scope of Part 5 of the Code. If it was not, then the new lease will remain outside the scope of Part 5 of the Code. Thus one way or another the operator under a subsisting agreement has the right to apply to renew it, either under Part 5 of the Code or under Part II of the Landlord and Tenant Act 1954."

"If, however, there is nothing in writing which signifies the occupier’s consent to the exercise of rights under the old code, then it appears that the transitional provisions do not apply, because there is no 'subsisting agreement'. That is not altogether surprising. If an operator had no rights under the old code, there would be no particular reason for it to acquire rights under the Code by virtue of the transitional provisions; and every reason to give effect to the legitimate expectations of property owners that no such rights under the Code would be created," he said.

Joshua Black of Pinsent Masons said: "The practical effect of this judgment is that the Court of Appeal confirmed that any renewed agreement will be governed by the terms of the 1954 Act rather than Part 4 of the Code, which landowners may see as striking a slightly fairer balance between the interests of landowners and operators."

"For operators though, this judgment will be seen as just another example of why the Code is just not working. It may be that any relief for landowners is short lived, as the government is currently conducting a consultation on the reforms to the Code, which closes in March 2021, with reforms possible soon after to address many of the operators’ concerns. It may be that this issue has been legislated on before the Supreme Court has the chance to hear any further appeal in either this case or the case of CTIL v Compton Beauchamp Estates," he said.