Plugging a gap in the Telecoms Code

The Upper Tribunal (Lands Chamber) decision in August 2022 that holders of concurrent leases subject to pre-existing code agreements could not be treated as a “party to the agreement”, and so could not terminate or modify a code agreement, highlighted a gap in the Electronic Communications Code and created considerable uncertainty for concurrent lessees (Vodafone Ltd v Gencomp (No 7) Ltd and another [2022] UKUT 613 (LC); [2022] PLSCS 141). That gap has now been plugged by the Court of Appeal in Vodafone Ltd v Potting Shed Bar and Gardens Ltd (formerly known as Gencomp (No 7) Ltd) and another [2023] EWCA Civ 825; [2023] EGLR 31. The Court of Appeal ruled that the Code should be interpreted as treating the persons entitled to the benefit and burden of an agreement – both as operator and site provider – as parties to the agreement whether or not they are the original parties to the agreement or their successors in title. The site and the background The case concerned a tower at the old fire station in Bingley, Yorkshire, leased in 2003 by the then freeholder to Vodafone for a term expiring in 2018. In 2018, before the lease expired, a subsequent freeholder granted a concurrent lease to APW for a term expiring in 2058. So APW became entitled to the reversion on Vodafone’s lease and to payment of rent by Vodafone. Gencomp became freeholder in 2020. It was not in dispute that APW could have granted Vodafone a fresh code agreement. The issue concerned the renewal or modification rights under part 5 of the Code. The renewal procedure under part 5 can be initiated by either the operator or the site provider but both must be a “party to the agreement”, a phrase which covers the original contracting parties and their successors in title. Vodafone served a suite of alternative notices on Gencomp and APW to cover all possibilities regarding the appropriate party to confer code rights and who should be bound by them, but argued that only Gencomp could grant it new code rights which would bind APW. APW argued that, as the concurrent lessee, only it was capable of conferring new rights and it should be treated as a party to the agreement with an order binding Gencomp. The tribunal decision On application to determine preliminary issues, the tribunal agreed with Vodafone that only a site provider who is party to the existing code agreement can confer a new code agreement under part 5 of the Code. This was either the original contracting party or its successor in title, Gencomp. However, Gencomp could not use part 5 as, due to the concurrent lease, it did not have the right to possession and occupation and could not confer it on Vodafone. APW, which did have the right to possession and occupation, was neither a party to the code agreement with Vodafone nor a successor in title to that party for the purposes of exercising the provisions in part 5. There was a gap in the legislation. Consequently, APW could not serve notices under part 5 of the Code where its headlease was granted after the date of the original agreement and operators such as Vodafone needed to seek new rights under part 4 of the Code, after lease end. Key points A “party to an agreement” includes the current site provider and operator The Code is to be interpreted purposively to give effect to its intention rather than just the words used The decision presented particular difficulties for concurrent lessees who wished to redevelop land subject to code agreements for whom there was no available mechanism to secure vacant possession. This meant considering alternative structures for redevelopment plans. The Court of Appeal decision APW appealed, arguing that, because a concurrent lessee had the right to rent under the lease and the benefit of the tenant covenants, it was in effect a party to the agreement, which bound it whether it was treated as a successor in title or not. The Court of Appeal agreed. While APW was not a successor in title to the original contracting party, the provisions of the Code setting out who is bound by a code agreement were not intended to be exhaustive. The correct approach – following that adopted by the Supreme Court in Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd [2022] UKSC 18; [2022] PLSCS 99 – was to work out how the regime was intended to work, which was that the persons currently entitled to the benefit and burden of the agreement as operator and site provider are a “party to the agreement” and able to exercise the rights conferred under part 5 of the Code. So Vodafone and APW could serve notices on each other under part 5 to renew or modify the current code agreement. The final word? The Court of Appeal decision will have been welcomed by landlords and tenants under concurrent leases. It is now clear that they do have the power to terminate existing code agreements subject to establishing one of the statutory grounds to oppose the renewal of a code agreement in the usual way. It is also a further demonstration of the common-sense approach adopted by the senior courts when interpreting the Code, the focus being on its purpose to drive long term investment and growth in digital communications infrastructure, rather than simply the language used. It will be interesting to see if the Court of Appeal’s decision is final or whether the Supreme Court will have its say. Louise Clark is a property law consultant and mediator Image © Global Warming Images/Shutterstock