In August this year, the Upper Tribunal published a decision which identifies a serious gap in Schedule 3A of the Communications Act 2003 (the Electronic Communications Code) (“Code”) and raises concerns for property owners, investors and developers when dealing with Code operators where there are “concurrent or intermediate leases”. These are leases that are granted to sit between, for example, the freehold and an existing lease so that the tenant under the concurrent lease becomes the landlord of the existing tenant. The effect of the Upper Tribunal’s current decision is that there is a potential problem for all parties, but in particular the tenant who was granted the concurrent lease, who as things stand will not have the right to use the Code to end an existing Code agreement (granted before the concurrent lease), which may interfere with development plans. In turn the operator will also not be able to rely on Code powers to renew a Code agreement against a concurrent tenant. Permission has now been granted to appeal the decision, which will be heard in the Court of Appeal next year.

Context

Vodafone Limited (“Vodafone”) had been granted by the freeholder lease of part of the roof of the Old Fire Station in London which expired in 2018. Subsequently the freeholder granted to AP Wireless II UK Ltd (“APW”) a concurrent lease, subject to and with the benefit of the existing Vodafone lease and this meant that APW was now the landlord of the Vodafone lease and Vodafone had been paying rent to APW since. At the time of the case Gencomp (No.7) Limited (“Gencomp”) was the freeholder.

Vodafone wished to renew its lease, but it was unclear whether it should renew with the freeholder (Gencomp) or the tenant under the concurrent lease (APW).

The Upper Tribunal determined that Vodafone’s lease was a “subsisting agreement” for the purposes of the Code, which meant that it continued, essentially governed by the statutory provisions of the Code.

The key issue for the Tribunal was whether Gencomp or APW was the appropriate party to deal with Vodafone and grant them a new agreement under the Code and whether in fact either of them could do so as a matter of law.

Decision

The Tribunal decided that there was a gap in coverage of the Code where a concurrent lease was granted of property already subject to a Code agreement. This is potentially a problem for all concerned, but in particular could inhibit the plans of the tenant under the concurrent lease.

In that situation, part 5 of the Code (relating to continuation, renewal and termination rights) is not available to renew subsisting Code rights. This is because the successor to the party who granted the original Code agreement can no longer grant a new Code agreement, because of the concurrent lease which makes the tenant the landlord of the operator. However, equally problematic is the fact that the tenant under the concurrent lease cannot deal with the operator, because it is not a successor to the party who granted the original Code agreement. Part 4 of the Code (relating to the power of the Tribunal to impose a Code agreement) cannot deal with this gap, but an operator can use it to obtain renewal or modification of Code rights. However, this does not help the tenant under the concurrent lease.

The decision is very problematic for a tenant granted a concurrent lease for development purposes, since it is not in a position to terminate the agreement with the operator (as it was not party to the original Code agreement and cannot use Paragraph 31 of the Code). A possible way round this is to make the tenant developer a party to the Code agreement between the site provider (such as the freeholder) and the operator, but this may not be commercially realistic.

Appeal

Permission has been granted to appeal this decision and many in the property and electronic communications industries consider that legislative change or a wider interpretation of the Code could be necessary to fix the uncertainty for both operators and site providers.

Case: Vodafone Ltd v Gencomp (No 7) Ltd & AP Wireless II UK Ltd [2022] UKUT 223 (LC) (17 August 2022)