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Telecoms operators do not have a choice between the Code and the 1954 Act on renewal of rights

The Upper Tribunal has considered for the first time the relationship between the new Electronic Communications Code and the Landlord and Tenant Act 1954, ruling that an operator in occupation under a lease protected by the 1954 Act is not entitled to ask the Tribunal to impose Code rights.

The new Code came into force in December 2017, replacing the original Electronic Communications Code (as amended in 2003). Under the original Code, telecoms operators who occupied land under a lease which had not been contracted out of the 1954 Act had security of tenure under both regimes. Whilst the point was never considered by the courts, this created a potential catch-22 situation where a landowner who wanted to redevelop their land was unable to terminate the operator’s Code rights because of the subsisting 1954 Act tenancy, but was also unable to terminate the 1954 Act tenancy due to the Code rights.

The new Code removes the uncertainty by asking the following question for leases granted after December 2017:

Q: Is the primary purpose of the lease to grant Code rights?

A: If yes – The agreement is protected by the Code. The 1954 Act does not apply, even if the lease has not been contracted out

A: If no – The Code does not apply and the lease will be protected by the 1954 Act in the usual way (unless it has been contracted out)

By way of an example, the primary purpose of a lease of a retail store, with ancillary rights to install a microcell to boost signal for customers in the store, is not to grant Code rights.

However, the new Code is not retrospective. Transitional provisions apply for subsisting leases protected by the 1954 Act granted before the new Code came into force. The Tribunal has now confirmed that an operator in occupation under a continuing tenancy protected by the 1954 Act would only be entitled to renew the tenancy under that regime. It is not able to choose between the 1954 Act and the Code. Once the new lease is granted, assuming the primary purpose is the grant of Code rights, the lease would no longer be subject to the transitional provisions and the operator would be entitled to use Part 5 of the Code to seek renewed Code rights when the new lease expires.

Aside from providing clarity on the interaction between the Code and the 1954 Act for subsisting agreements, why does this matter in practice? One reason is that an operator who is forced to renew its rights under the 1954 Act does not benefit from the lower valuation methodology or the automatic sharing and assignment rights under the new Code and so the decision is likely to strengthen the bargaining position of landlords in these cases.

Cornerstone Telecommunications Infrastructure Limited v Ashloch Ltd (1) and AP Wireless II (UK) Ltd (2) [2019] UKUT 0338 (LC)