Renewing subsisting telecoms agreements under Landlord and Tenant Act 1954

The Upper Tribunal has clarified another aspect of the new Electronic Communications Code, this time in respect of the complex interplay between the Code and the Landlord and Tenant Act 1954.

When Parliament decided that the relationship between telecoms legislation and property law needed an urgent overhaul, two particular issues were at the forefront:

• the confusion caused by operators’ leasehold sites often benefitting from a dual layer of statutory protection under both the previous Code and the Landlord and Tenant Act 1954 (the 1954 Act).
• the operators’ assertion that rental levels for telecoms sites were too high and that these costs were stifling the expansion of their networks.

For brand new telecoms agreements entered into since the coming into force of the new Code, those issues have been resolved, albeit not without controversy). However, the new Code does not apply entirely retrospectively to telecoms agreements entered into prior to 28 December 2017 (known as ‘subsisting agreements’) and the transitional provisions state that where the 1954 Act applied prior to the coming into force of the new Code, it continues to apply.

Facts

In Cornerstone Telecommunications Infrastructure Ltd v Ashloch Ltd, Vodafone occupied a rooftop site under a lease granted on 14 June 2002. The contractual term of the lease had expired in 2012 but, because it was protected under the 1954 Act, Vodafone ‘held over’ and remained in occupation before assigning the lease to Cornerstone in 2019.

Upon taking the assignment, Cornerstone served a notice on the landlord under Part 4 of the Code, seeking the grant of a new Code agreement at a lower rent and then asked the Upper Tribunal to impose a new agreement on the landlord.

The transitional provisions state that:

“Part 5 of the new code (termination and modification of agreements) does not apply to a subsisting agreement that is a lease of land in England and Wales if it is a lease to which Part 2 of the Landlord and Tenant Act 1954 applies…”

It was accepted by both parties that the lease constituted a subsisting agreement and as a result Cornerstone could not seek to renew it under Part 5 of the Code. However, Cornerstone submitted that it was entitled to seek an entirely new agreement of the site under the provisions of Part 4 of the Code.

The landlord challenged the Upper Tribunal’s jurisdiction to deal with the application, by asserting that as Cornerstone was currently ‘holding over’ under a subsisting agreement, the only way that it could seek a new agreement would be by way of an application to the county court pursuant to Section 24(1) of the 1954 Act.

Decision

The tribunal judged that the renewal of rights by an operator in situ is governed (at least principally) by Part 5 of the Code. It also noted that the effect of the transitional provisions prevented an operator from relying upon the Part 5 process to renew a subsisting agreement that benefits from 1954 Act protection.

Cornerstone made various, complex legal submissions as to why it was entitled to rely upon Part 4 of the Code to seek a new agreement instead of proceeding under the 1954 Act.

The tribunal undertook a forensic examination of each submission in turn, considering them in light of both the Court of Appeal’s decision in Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd and the Law Commission’s consultation and reports that preceded the introduction of the Code.

It firstly held that (with the exception of interim and temporary agreements) Part 4 of the Code, can only be used to impose a Code agreement on an occupier of land. In this scenario, it was Cornerstone rather than the landlord, which was in occupation of the rooftop site under a subsisting agreement.

As a result, Cornerstone could not rely upon Part 4 of the Code to seek the imposition of a new agreement on the landlord.

The Tribunal further noted that Cornerstone’s submissions that it could rely upon Part 4 of the Code to seek a new agreement when already in occupation “would be even more astonishing in the case of a subsisting agreement to which…the 1954 Act applies”, since it would enable operators:

• to only give 28 days’ notice to landowners, instead of the six to 12 months’ notice required under the 1954 Act
• to escape the open market rental valuation assumptions contained within the 1954 Act
• to avoid the starting point that it is necessary to have regard to the terms of the existing tenancy.

The tribunal determined that it could not have been Parliament’s intention that operators could circumvent the wording of the transitional provisions. It therefore held that where an operator is in occupation of land under a subsisting agreement, which is protected by the 1954 Act and wishes to renew the same:

“[it] must first apply in the county court for a new tenancy under the 1954 Act”.

Accordingly, the tribunal had no choice but to hold that it lacked jurisdiction to deal with Cornerstone’s reference and to strike it out.

Commentary

This case decided a long-standing point of contention between landowners and operators but, in practice, its impact may not be so momentous as might be expected.

A significant number of subsisting agreements are either contracted out of the 1954 Act or do not attract its protection (by virtue of only being contractual licences). The renewal of these agreements will therefore proceed in accordance with Part 5 of the Code and will be caught by its ‘no scheme’ valuation principle. Furthermore, the tribunal has made it clear that the transitional provisions only apply to the first renewal of any subsisting agreements that are 1954 Act protected. Any subsequent renewals will fall squarely within the ambit of Part 5 of the Code.

Operators, taking a longer-term view, may therefore be fairly sanguine about this decision. But nevertheless, it will still be warmly received by the landowner community.

Cornerstone Telecommunications Infrastructure Ltd v (1) Ashloch Ltd and (2) AP Wireless II (UK) Ltd [2019] UKUT 338 (LC)