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Telecoms Code: Tribunal clarifies who is entitled to grant a Code Agreement

The Upper Tribunal has, for the first time, dismissed a reference to it under paragraph 20 of the Code and ruled that a Code Agreement can only be sought from a person who is the ‘occupier’ of land.

Operators have been keen to make use of the powers granted to them by the new Code and we have already seen a significant number of paragraph 20 notices being served on landowners, demanding the grant of new agreements, with follow-up references to the Tribunal becoming increasingly common.

However, on this occasion, Cornerstone fell foul of the Code’s strict and complex set of rules over who exactly can grant such agreements and upon whom the Tribunal can impose an agreement.

Facts

In 2004 Vodafone had been granted a ten year lease of a greenfield site (the Site), next to the main Didcot to Swindon railway line (the Site), and constructed its own mast on it.

The contractual term of the lease, which was contracted out of the Landlord and Tenant Act 1954, expired in 2014. Vodafone remained in occupation of the Site after that date and started negotiations for the grant of a new lease with the freehold owner of the Site, Compton Beauchamp Estates (the landlord).

After those negotiations broke down in 2017, the landlord issued possession proceedings against Vodafone in the county court. Vodafone actively sought to defend those proceedings by arguing that it had continued to pay rent, and so it now occupied the Site under a new annual periodic tenancy that was protected by the 1954 Act.

Whilst those possession proceedings were ongoing, Cornerstone (a joint venture between Vodafone and Telefonica that increasingly manages more and more of these operators’ physical infrastructure, and a Code Operator in its own right) served a formal paragraph 20 notice on the landlord seeking the grant of a new Code agreement of the Site between the landlord and Cornerstone. Six weeks later, Cornerstone applied to the Tribunal asking that it impose a new Code agreement on the landlord in favour of Cornerstone.

Who may voluntarily grant a Code agreement and who will be bound it?

Under paragraph 9 of the Code, a Code agreement can only be made between ‘the occupier of the land and the operator’.

The Code contains a detailed definition of the meaning of ‘occupier’ and the Tribunal here clarified that occupation is a question of fact, rather than a matter of legal status. It means physical presence on and control of the land.

Paragraph 10 of the Code builds upon this concept and sets out exactly who else will be bound by the rights contained within a Code agreement made between the occupier of the land and the operator. Whilst the rules are complex, Code agreements that have been concluded voluntarily will most commonly be binding on:

  • successors in title to the occupier’s interest in land, for example a buyer of the freehold (or an assignee if the occupier’s interest is leasehold);
  • holders of inferior interests granted out of the occupier’s interest in the land after the Code agreement has been granted, for example sub-tenants; and
  • any other person with an interest in the land who agrees to be bound by it, for example a landlord if it consents to its tenant entering into a Code agreement.

On the facts, the Tribunal found that at all relevant times since service of Cornerstone’s paragraph 20 notice on the landlord, Vodafone had been in actual occupation of the Site to the exclusion of the landlord. The fact that the landlord had issued possession proceedings against Vodafone was held not to be relevant to the question of who was actually in physical control of the Site.

The Tribunal therefore concluded that even if the landlord had wanted to grant a Code agreement to Cornerstone in respect of the Site, it could not have done so as it was not in occupation of it.

Against whom can a Code agreement be imposed?

The concept of the ‘occupier of land’ is not found in Part 4 of the Code, which deals with the Tribunal’s powers to impose new agreements and to order that third parties be bound by existing Code rights. Instead the Tribunal’s powers are defined as being exercisable in respect of any ‘relevant person’.

Cornerstone argued that the concept of ‘relevant person’ was much wider than ‘occupier of land’. As a result, whilst the landlord might not have been an ‘occupier’ and so could not voluntarily grant Code agreements in respect of the Site, it was still a ‘relevant person’ and so the Tribunal could impose Code agreements on it.

The Tribunal disagreed, holding that the concept of ‘relevant person’ merely enabled it to make the two forms of Order (as permitted by paragraph 20): either impose a Code agreement on the occupier of land or order that a third party be bound by a right in a Code agreement that is already in existence.

Whilst the Tribunal did clarify that it did have the jurisdiction to confer a new Code agreement on an operator that was already in occupation (since otherwise ‘renewals’ of existing sites would effectively fall outside the Code), it made the point that the Part 4 process involves the imposition of intrusive rights on unwilling parties, and therefore a cautious approach needed to be taken when determining the extent of its jurisdiction to do so.

As a result, the Tribunal determined that it does not have jurisdiction to compel the grant of rights by a person who is not in occupation to an operator who is also not in occupation.

Comment

This case was eagerly anticipated, as it was intended to build on the Tribunal’s seminal exploration of the Code’s valuation concepts in the case of EE Ltd and Hutchison 3G UK Ltd v The Mayor and Burgess of the London Borough of Islington [2019] UKUT 53 (LC) discussed in our article Telecoms Code: consideration and compensation finally under the judicial spotlight, albeit in a greenfield instead of rooftop scenario, and therefore hopefully enable both landowners and operators to move forward and unlock new deals.

Instead, we have a decision that is likely to throw an immediate spanner into the infrastructure consolidation programmes that have been a feature of the Code agreement renewals market over recent years.

As a result, it is likely that we will see a further short-term reduction in the number of these renewals taking place, whilst the mobile network operators reconsider how best to structure their deals to ensure that they do not fall foul of the ‘occupier’ hurdle.

Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd [2019] UKUT 107 (LC)

Disclaimer

This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.

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