March 23, 2020

The New Electronic Communications Code and the 1954 Act

In the recent case of Cornerstone Telecommunications Infrastructure Ltd v Ashloch Ltd , the Upper Tribunal for the first time had to consider the relationship between the new Electronic Communications Code and the Landlord and Tenant Act 1954 (“the 1954 Act”). Notably, the Upper Tribunal had to determine whether it had jurisdiction under Part 4 of the Electronic Communications Code 2017 (the “New Code”) to impose Code rights over land in favour of an operator which is already in occupation, holding over under a tenancy pursuant to the 1954 Act.

Facts and statutory background

Vodafone occupied a rooftop site under a lease granted to them 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 Telecommunications Infrastructure Ltd, the Claimant in 2019.

Upon taking the assignment, the Claimant (the “Operator”) served a paragraph 20 notice under Part 4 of the New Code on Ashloch Ltd, the Defendant (the “Landowner”), 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 Landowner. The paragraph 20 notice is the first stage of a process by which a Code operator can apply to the tribunal under Part 4 of the Code for an order imposing Code rights on the Landowner if they do not agree to them.

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…”

As the tenancy had been granted prior to the introduction of the New Code, it was therefore considered a “subsisting agreement”. As a result, the Operator could not seek to renew it under Part 5 of the New Code. However, the Operator submitted instead that it was entitled to seek an entirely new agreement of the site under the provisions of Part 4 of the New Code.

The Landowner challenged the Upper Tribunal’s jurisdiction to deal with the application, by asserting that as the Operator 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 the 1954 Act.

Decision

The tribunal held that it could not impose a new Code agreement on the Landowner as the Operator was already in occupation under a tenancy granted prior to the introduction of the New Code and this was continuing under the 1954 Act. The New Code was not intended to have such retrospective effect. In such a situation, the Operator could not make use of the New Code to obtain a new agreement but must apply to the court for a new tenancy under the 1954 Act.

The Operator 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 examined 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 which preceded the introduction of the New Code.

It firstly held that Part 4 of the New Code can only be used to impose a Code agreement on an occupier of land. In this scenario, it was the Operator rather than the Landowner which was in occupation of the rooftop site under a subsisting agreement. Therefore, the Operator could not rely upon Part 4 of the New Code to seek the imposition of a new agreement on the Landowner.

The tribunal notably considered that the Operator’s submission that it could rely upon Part 4 of the New 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

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

Commentary

This is a decision welcomed by landowners as the rent under a New Code agreement would have been considerably lower than that under a 1954 Act renewal tenancy, because a new Code agreement rent is assessed as it is on a “no network” assumption.

The decision also crucially sheds light on an aspect of the New Code that was previously unclear; it is the first time the tribunal has had to consider the relationship between the New Code and the 1954 Act. The effect of the decision is that a paragraph 20 agreement cannot be sought by an operator already in situ regardless of whether it is a 1954 Act tenant holding over or not. The renewal process under the 1954 Act must be followed and cannot be sidestepped by an operator serving notice pursuant to paragraph 20 of the New Code.

We expect that the Operator will look to appeal the decision.

The article first appeared in our Real Estate Bulletin - March 2020.