Electronic Communications Code: Piggy in the middle

Posted: 21/12/2022

In Vodafone Ltd v Gencomp (No 7) Ltd and another [2022] UKUT 613 (LC); [2022] PLSCS 141, the deputy president of the Upper Tribunal (Lands Chamber) highlighted a further structural problem with the Electronic Communications Code – an issue which, it seems, will need legislation to correct. Namely, the ECC as drafted “breaks down when it encounters a concurrent lease”. The decision has serious consequences for those who invest in ground, tower and rooftop ECC sites via intermediary leases because the decision states they have no rights to bring Code agreements to an end or to seek modified terms, save where they are a “party” to the original agreement.

The facts

The building known as the Old Fire Station is located in Bingley. In 2003, the then-freeholder entered into a rooftop agreement with Vodafone for a term of 15 years, until late 2018. The lease was excluded from the Landlord and Tenant Act 1954. By 2018, ownership of the freehold was in different hands. A few months prior to the expiry of the lease term, the new freeholder owner granted an intermediate lease to AP Wireless II (UK) Ltd. The lease was granted for a substantial premium, but with only a peppercorn rent. Subsequently, the freehold changed hands again and came into the ownership of Gencomp.

The arguments

Vodafone argued that, in order to renew its rights, the route for it to do so was to serve a paragraph 33 notice on the freeholder, Gencomp, and to use paragraph 34 to obtain a renewal of the agreement, cutting out AP Wireless entirely.

It relied on the wording of paragraph 33(1) of the Code, which provides that such a notice may only be served on “the other party to the agreement” and paragraph 10, which extends the meaning of that phrase to cover only one other class of person other than the original contracting party to the agreement, namely, successors to the original contracting party.

The Code

Paragraph 10 is concerned with two distinct groups; subparagraphs (1), (2) and (3) deal with the occupier who conferred the rights, its successors in title and others who derive their interest or right of occupation out of the interest of the original contracting party or his successor. These subparagraphs only apply where there is an interest in land, so do not catch licensees. The remainder of the paragraph deals with those who agree to be bound by code rights, which did not apply in this case.

Further, although subparagraph (2) identifies three different categories of person who will also be bound by code rights conferred by the original contracting party, subparagraph (3) picks out only one of those, namely, a successor in title who is bound by a code right by virtue of subparagraph (2)(a), and provides they are to be “treated as a party to the agreement”. The other two categories – namely, successors, and those whose interest in land is created after the right is conferred and is derived directly or indirectly out of the interest of the original contracting party (to include their successors and those whose interest is then created from that interest) – are not treated as a party to the agreement.

The decision

The Upper Tribunal held that the original agreement entered into in 2003 was a subsisting agreement, caught by the transitional provisions, and therefore took effect as an agreement under Part 2 of the Code.

The Tribunal succinctly summarised the main question as follows: what procedure under Parts 4 or 5 should an operator follow to obtain a new code agreement, where a concurrent lease was entered into by a site provider after it has entered into the original code agreement?

The UT held that the wording of paragraph 10 was key, and that the only permissible statutory interpretation was that the term “party to the agreement” could only apply to the persons mentioned in paragraph 10(2)(a), per paragraph 10(3) – a successor in title who is bound by a code right. AP Wireless was not the successor in title to the original freeholder. As such, the UT held that AP Wireless would have been unable to terminate the agreement by serving notice under paragraph 31 should it have wished to do so – a step which is only open to a site provider who is “party to an agreement”. For the same reason, an operator is not entitled to give notice to a concurrent lessee under paragraph 33 as they are not “the other party to the agreement”. For this reason, it came to the conclusion that the Code breaks down when it encounters this situation, because there is no route within the Code by which the only other party to the agreement, Gencomp, can confer a right to possession or occupation on Vodafone. It did, however, consider that there was no bar to the operator using paragraph 20 of Part 4 of the Code to acquire new rights, now that the term of the original agreement had expired, and in doing so, applied the logic in Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd [2022] UKSC 18; [2022] EGLR 28 in relation to the parties being held to their bargain for the duration of the original agreement. Notwithstanding this, the lacuna which prevents a concurrent lessee from bringing an agreement to an end will need to be addressed for the Code to function effectively.

This article was published in Estates Gazette in October 2022.

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