Electronic Communications Code - Case Briefing
Sarah Hamby, 19th July, 2022
EE Limited and Hutchinson 3G UK Ltd v Stephenson and AP Wireless II (UK) Ltd [2022] UKUT 180 (LC)
Summary
The Upper Tribunal has determined the terms of a telecoms lease upon renewal pursuant to Part 5 of the Electronic Communications Code. The decision helps owners and operators, when seeking to negotiate the terms of a Code agreement, to understand the approach which the Tribunal is likely to take when ruling on disputed terms. Sarah Hamby explains why…….
Background
The telecom operators jointly occupied an electronic communications site pursuant to a lease which expired in May 2019. That lease was contracted out of the security of tenure provisions in the Landlord and Tenant Act 1954 and had been continued pursuant to paragraph 30 of the Code. The operators served a notice pursuant to paragraph 33 (1) of the Code seeking a renewal of the lease. Whilst the renewal itself was not opposed, the parties were unable to reach an agreement upon all the terms of the renewal lease and the operators applied to the Upper Tribunal for an order terminating the existing agreement and imposing a new agreement between the parties.
The Disputed Terms
The Tribunal must determine any terms that are not agreed between the parties, such terms to be those as the Tribunal deems appropriate subject to the provisions of paragraph 23 of the Code.
The Tribunal found in this case that the renewal lease should include the following key terms: -
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An unrestricted right to upgrade equipment – In On Tower UK Limited v Green [2022] 4 WLR 27 the site provider sought to restrict upgrade rights on the basis of security concerns, visual intrusion and excess traffic noise. The Court of Appeal upheld the Tribunal’s decision to impose unrestricted upgrade rights as the other terms adequately protected the site provider in respect of those concerns. In the current case, the site provider sought to restrict the right to such upgrades that have no more than a minimal adverse impact and impose no additional burden upon the site provider. However, the site provider took a different approach and suggested that the upgrade rights were not required and in practice any upgrade would not infringe the restriction sought. The Tribunal accepted that further modifications may take place over the lifetime of the renewal lease and found that the significant restriction sought by the site provider would tend to obstruct the objectives of the Code. It also considered that such a restriction would likely lead to further disputes between the parties. Finally, it considered that, on the facts, the possibility of loss and damage to the site provider is theoretical only.
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A right to share occupation – The site provider sought to limit the right to share to the operators’ equipment only (and not the site) and again sought to restrict the rights to those that have no more than a minimal adverse impact and impose no additional burden upon the site provider. The Tribunal again considered this was at odds with the objectives of the Code and would likely to give rise to a dispute. It noted that whilst the operators’ business model does not involve offering sites to other Code operators, they are under an obligation to make sites available to facilitate improvement to telecommunications services to the public. It considered the site provider’s real concern was it would be bound by new Code rights granted by the operators to third party operators, however the Tribunal did not accept that to be the correct interpretation of paragraph 10(4) of the Code and noted the site provider could guard against this concern by way of an express statement that it does not agree to be bound by any Code rights acquired by sharers.
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A landlord’s redevelopment break clause - The parties had agreed to a term of 10 years and the site provider sought a right to determine the lease after 5 years if it intends to redevelopment the site or any neighbouring land. The operators sought to resist this on the basis that it would prejudice their ability to recover their investment if their occupation ceased after 5 years. The Tribunal considered that it was not the policy of the Code to stand in the way of redevelopment for more profitable use by site providers, which is reflected by the statutory grounds of opposition under paragraph 20 of the Code. The Tribunal noted that even if the site provider served a break notice, the operators would be entitled to apply to the Tribunal for a new lease and put the site providers to proof of their intention to redevelop.
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A wide indemnity from the operators to the site provider– whilst the parties agreed that the renewal lease should include an indemnity, they were unable to agree the extent of the same. The Tribunal confirmed the underlying principle is that the site provider, which will not receive any benefits from the use of the site, should not be expected to share the burden of the risks created by the exercise of those rights. The Tribunal therefore refused to limit the indemnity to negligent acts only and imposed a wider indemnity as sought by the site provider.
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An annual rent of £750 – the Tribunal adopted the structured approach, first identified in Vodafone Ltd v Hanover Capital Ltd [2020] EW Misc 18 (CC). The Tribunal stated where the assessment is being undertaking pursuant to paragraph 24 of the Code, parties should avoid the expense of preparing evidence of real-world transactions and analysis on the comparative method. The Tribunal did take into account a restriction in the site provider’s headlease that limited the use of the site to “any communications use”. The Tribunal considered that a “communications use” is wider than use solely for the provision of an electronic communications network and it does not follow that just because a site has limited use, a person who wants to occupy the site for that use would pay only a nominal sum.
Comment
The law is continuing to develop in this area and this case provides a useful illustration as to how the Tribunals approach the determination of terms which the parties have been unable to reach an agreement upon. Gosschalks LLP specialises in acting for both site owners and operators in relation to telecommunications issues including renewal agreements.
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