UK Upper Tribunal confirms another gap in the Telecoms Code - the problem with concurrent leases

Facts and Background

This case concerns the tower of the Old Fire Station at Market Street, Bingley (the “Property”). In 2003, Vodafone had been granted a lease by the then freeholder for the purpose of erecting telecoms apparatus on the tower.  The freehold subsequently changed hands multiple times. The contractual term of the original agreement with Vodafone expired in 2018. Prior to the expiry of Vodafone’s lease, a successor to the original freeholder and predecessor to the current freeholder granted a concurrent lease to AP Wireless (“APW”): an intervening leasehold interest granted subject to and with the benefit of Vodafone’s lease. The current freeholder of the Property is Gencomp. 

Vodafone sought to acquire a new Code agreement, and neither Gencomp nor APW objected to that in principle.  The central issue in the case was how that could be achieved in light of APW's concurrent lease, and what the tribunal’s jurisdiction was in this respect. 

The UT bore in mind the Supreme Court's decision only a few weeks earlier in the Compton Beauchamp case (see Related Materials).  In particular, the parties before the UT all agreed that whilst a Code agreement must be made between the Code operator and the "occupier", occupation by the applicant in its capacity as a Code operator (in this case Vodafone) is ignored when identifying the counterparty to the new agreement.  Occupation by a Code operator who is not the applicant (in this case APW) is not disregarded.  It appeared that APW was therefore the relevant occupier and contracting party, but this case had to wrestle the question of whether APW (as Vodafone's immediate landlord) or Gencomp (as the successor in title to the freeholder who originally entered into the Code agreement) was the party capable of granting a new Code agreement or (in the alternative) having such an agreement imposed on it by the UT and the Code.  

The Issues

The relevant Code provisions are those contained within Parts 4, which deals with the power of the courts to impose agreements where the occupier fails to agree terms with the Code operator, and Part 5, which deals with termination and modification of Code agreements.

The specific provision of the Code that the parties in this case were interested in was paragraph 33, which deals with modification of, or the renewal or replacement of expired Code agreements.  Paragraph 33 states that a notice terminating an existing Code agreement and proposing a new agreement can be served by "An operator or site provider who is a party to a code agreement".  The freeholder who originally entered into the Code agreement would obviously qualify to serve notice under paragraph 33 if it was still the landlord.  And pursuant to paragraph 10(3) of the Code, the original landlord's successor in title is treated as a party to the agreement so would also qualify to serve notice.  That would clearly apply to Gencomp if it was not for the complication that Vodafone's immediate landlord was APW. 

APW reasoned that it would not be in line with the policy behind the Code if it, as Vodafone’s immediate landlord, could not enter into a new agreement with Vodafone.  It submitted that APW was the only party capable of serving or receiving a valid paragraph 33 notice and capable of granting Code rights to Vodafone because it was Vodafone's immediate landlord and the "occupier" within the meaning of paragraph 9 of the Code, and it should be treated as the ‘other party to the agreement’.  As such, APW argued that it was the party that should enter into the new Code agreement with Vodafone, procuring an order from the UT ensuring the rights would be binding on Gencomp too.  APW argued that it was in a position to serve notice under paragraph 33 of the Code to modify Vodafone's Code rights in the manner Vodafone required (in this case the grant of a replacement agreement). 

Vodafone argued that only Gencomp could grant it new rights under the Code, and that the UT should therefore make an order ensuring the new rights granted in an agreement with Gencomp would be binding on AWP.  As noted above, paragraph 33 states that a notice can be served by "An operator or site provider who is a party to a code agreement", which includes any successor to the original site provider.  Gencomp, as successor to the original freeholder, is treated a party to the original Code agreement under section 10(3) of the Code.  Whilst paragraph 10 states that the holder of a concurrent lease (being an entity which has an interest in land derived out of the original landlord's interest) is bound by the conferred code rights, it does not include a provision equivalent to paragraph 10(3) which would treat the holder of a concurrent lease as being a party to the code agreement and capable of serving notice under paragraph 33.  

In response to this conundrum, APW argued that the grant of the concurrent lease operated as an assignment of the reversion or the original lease as a matter of law, which would make APW a successor to the original landlord and (pursuant to paragraph 10(3)) an entity treated as being party to the Code agreement.  

The Decision

In the key parts of its decision the UT held that: 

1.    Although it was the successor to the original grantor and so treated under paragraph 10 as a party to the original agreement, Gencomp could not confer new Code rights on Vodafone under Part 5 of the Code because the power to confer code rights passed to APW (the relevant person and "occupier") when the concurrent lease was granted.

2.    Under paragraph 33 in Part 5 of the Code, Vodafone could serve notice on "the other party to the agreement" requiring them to agree modifications, additions or renewal terms.  APW is not treated by the Code as being the "other party", and a notice served on Gencomp would be of no effect because for the reason mentioned immediately above Gencomp isn’t in a position to grant rights pursuant to Part 5.   

3.    The UT has no power to order the parties to do something they could not do voluntarily under the Code.  The UT's powers under Paragraphs 20 (in Part 4) and 34 (in Part 5) are in that sense limited and cannot fill in the gaps in the Code that arose in the present circumstances.  

4.    The practical solution for parties in this situation may therefore be found by construing Part 4 of the Code as being applicable in cases where Part 5 is unavailable.  The UT held that "Part 5 deals only with the termination, modification and renewal of agreements between the original parties to the agreement and their successors in title.  It does not apply where the operator and the occupier of the land .. .are not both parties to the agreement or their successors.  There seems .. to be no obstacle in those circumstances to an operator making use of Part 4".

5.    The UT has jurisdiction to impose an agreement on Vodafone and APW under paragraph 20 (in Part 4 of the Code), conferring Code rights on Vodafone, and it could make a separate order making those rights binding on Gencomp.  But it had no jurisdiction to order the parties to enter into an agreement under paragraph 34.

Conclusion and takeaways

The UT did recognise that a legislative fix might be required to correct this and other unintended gaps in the operation of the Code.  In recommending that in circumstances where a concurrent lease has been granted the parties should seek to rely on Part 4 of the Code for the Court to impose an agreement on the relevant parties, because it could not rely on Part 5, the UT recognised that the solution is imperfect.  The two parts of the Code operate differently, with different time limits and the burden of proof shifting between the parties under each Part.

Further, the UT recognised that a site provider which was not party to the original Code agreement (and not the successor to that original party) cannot give notice under paragraph 31 to bring the agreement to an end, and that in that scenario no solution can be found in Part 4 of the Code.  Although in the present case the parties were looking to extend Vodafone's rights under a new agreement, it might have been that the occupier wanted to terminate the agreement and Code rights on one of the grounds set out in the Code, such as an intention to redevelop.  For the reasons explored in this case, Part 5 appears to be out of reach for an occupier that was not a party to the original agreement and is not treated as such by paragraph 10.  In that situation, the (again imperfect) solution offered by the UT was that any occupier holding a concurrent lease and wishing to terminate Code rights without granting a new Code agreement should ensure before taking their concurrent lease that there are no pre-existing Code agreements that could interfere with their ability to rely, when the time comes, on  the relevant termination rights contained in Part 5.  That may be easier said than done!

Authored by Tim Reid, Megan Stewart and Jessica Hickson.