Don’t fall into the gap trap! Difficulties with concurrent leases and the Electronic Communications Code

Introduction

Tenants of leases subject to and with the benefit of the Electronic Communications Code (the Code) agreement (also known as concurrent or intermediate leases) should be wary of falling into a gaping trap in the Code. It has been confirmed that a tenant of a concurrent lease does not have the right to use the Code to end an existing Code agreement if it was granted before their concurrent lease. Any tenants therefore contemplating redevelopment of land in such circumstances must consider alternative structures to avoid this trap.

This gap was highlighted  by the recent case of Vodafone Limited (Vodafone) v (1) Gencomp (No.7) Limited (Gencomp) (2) AP Wireless II (UK) Limited (APW).  The Tribunal in this case was actually considering how an operator in occupation can renew its Code rights if a concurrent lease has been granted to a third party. However, the way the Code has been interpreted and applied in the judgment confirmed this potential gap trap.

Facts of this case

In 2003, Vodafone was granted a lease (a Code agreement) of the roof of the Old Fire Station in London by the freeholder. Vodafone took occupation of the site for its electronic communication apparatus.

Before the expiry of Vodafone’s lease, a concurrent lease was granted to APW (expiring in 2058). The concurrent lease was granted subject to and with the benefit of Vodafone’s lease and APW became Vodafone’s immediate landlord.
At the time of the case Gencomp (No.7) Limited (Gencomp) was the freeholder of the site.

Vodafone’s lease expired and it wanted to renew it under the Code. However, due to APWs concurrent lease it did not know who had the right to renew its agreement. The key issue for the Tribunal was therefore if it was the freeholder (Gencomp) or the immediate landlord (APW) who was the appropriate party to renew Vodafone’s agreement.

Applicable parts of the Code

The applicable parts of the Code are Part 4 and Part 5.

Under Part 4 of the Code telecommunications operators have rights in order to facilitate and operate their networks. Part 4 enables an operator to give notice to a relevant person and require them to provide a Code right or to be bound by a Code right.

Part 5 of the Code governs the continuation, renewal and termination rights of Code agreements. Part 5 states that notices can only be served on the other party to the original Code agreement (or their successors in title).

The Decision

The Tribunal considered Part 4 and 5 of the Code.

Part 5 – the Tribunal found that it did not have jurisdiction to order the renewal of the Code agreement under Part 5 of the Code.

The freeholder gave up its rights under Part 5 when granting the lease to APW. However, the immediate landlord APW was not a party to Vodafone’s original Code agreement or a successor in title to the freehold interest. Therefore, under Part 5 APW weas also unable to renew (or terminate) the Code agreement.

Part 4 – the Tribunal found it did have jurisdiction to order the renewal of the Code agreement under Part 4 of the Code.

APW as the occupier was in a position to grant new Code rights or to have a Code agreement imposed upon it by the Tribunal.

What do Tenants of concurrent leases need to be aware of regarding the Code?

The Tribunal’s decision provides clear guidance in relation to who an operator should serve notice on to renew a Code agreement.

However, it also makes it clear that if you are the tenant of a concurrent lease as you are not an original party to the Code agreement you cannot bring a Code agreement to an end using Part 5 of the Code. This is certainly problematic for development purposes. Tenants of concurrent leases should think about alternative structures if they wish to develop, such as becoming a party to the Code agreement or making sure any Code agreement is terminated before they acquire their interest.

Permission to appeal this decision has been granted so we will wait with interest to see how it progresses.

If you have any questions about this topic, please get in touch with one of our experts info@ts-p.co.uk.