Ben Sharples FRICS/FAAV
Posted on 25 Feb 2020

Electronic Communications Code: Interaction between the Code and the LTA 1954

The Landlord & Tenant Act 1954 ("1954 Act") confers significant security of tenure and many telecommunication masts are let on leases governed by this Act. Section 24 of the 1954 Act allows the lease to continue in certain circumstances and a tenant to remain in occupation beyond the contractual expiry date, but it is possible for the parties to contract out of the security of tenure provisions.

The recent case of Cornerstone Telecommunications Infrastructure Ltd v Ashloch Ltd [2019] considers whether Code rights can be imposed in favour of an operator already occupying the site in this way and includes a helpful consideration of the way the Code and the 1954 Act interrelate.

Subsisting Agreement

The issue in this case was how a subsisting agreement, which was already in force when the Code commenced on 28th December 2017, should be treated, in view of the fact that it was governed by the 1954 Act and how the 1954 Act interacted with the Code.

Although the Code does not act retrospectively, transitional provisions mean that any "subsisting agreements" become Code agreements, subject to 2 material modifications, which make the Code more landowner-friendly.

The first change is that operators governed by a subsisting agreement cannot assign them as of right. Part 3 of the Code allows such an assignment, even if the terms of the lease prevent such action. That Code right is removed and operators are similarly prevented from exercising the Code rights of upgrading telecoms apparatus on the site or sharing it with other users.

The second alteration is that Part 5 (termination and modification of agreements) of the Code will not apply to a subsisting 1954 Act lease (whose primary purpose is to confer Code rights on an operator) which is not contracted out of the security of tenure provisions.

Arguments

This case concerned a rooftop site. The lessor argued that the operator could not use Part 4 of the Code, as it was already in occupation. It also said that, as the lease was continuing under section 24 any new rights must be sought by applying for a new tenancy in accordance with the 1954 Act.

The operator maintained that it could either seek a new lease using the 1954 Act procedure or that Part 4 of the Code (the procedure for obtaining a new agreement) could be used as an alternative to Part 5.

Decision

The operator's primary argument was that Part 4 is not excluded from applying to a subsisting agreement. The Tribunal ruled that Part 4 is about imposing agreement on landowners and the transitional provisions state that subsisting agreements are equivalent to Code agreements already granted in accordance with Part 2. Therefore, Part 4 does not need to be excluded as it could never apply. Part 4 can only be used for the purpose of obtaining interim or temporary rights.

Although this point was taken as a preliminary issue, the finding that the 1954 Act procedure applies, meant that the County Court procedure applied and the Tribunal had no jurisdiction. This resulted in the whole case being struck out.

The Tribunal also confirmed that Part 5 could not be used by the operator to obtain a new lease and that a new tenancy must be applied for in accordance with the 1954 Act.

Implications

This case dealt with a 1954 Act lease which was not contracted out and which continued as a statutory periodic tenancy. There will be many agreements which are contracted out of the security of tenure provisions. Where the fixed terms of those leases expired before 28 December 2017, the actions of both parties will have to be carefully considered, so that the status of any new agreement can be determined. The terms of that agreement will dictate which route should be adopted when considering its renewal.

Applying the facts of the case, but assuming the fixed term expired after 28 December 2017, the operator would be able to use Part 5 of the Code to apply for a renewal tenancy.

Paragraph 20 notices

Paragraph 20 notices under Part 4 can only be used when operators are seeking new Code rights, which will, in most cases, be in connection with new sites. This procedure cannot be used where renewal of Code rights is sought – as with an operator on an existing site. This means that any existing paragraph 20 notices should be carefully reviewed, as they may well be invalid.

Renewal under the 1954 Act

Subsisting 1954 Act agreements, whose primary purpose is the granting of Code rights, must be renewed under the 1954 Act, where there is no contracting out of the associated security of tenure provisions. It is therefore important to establish whether this has been done.

This provides significant advantages to a landowner who is able to rely on the open market rent provisions of the 1954 Act, as compared to the "no network" assumptions, which have a marked downward effect on rent under the Code.

Terms of the new lease

Additional benefits are secured by landowners as paragraph 23 of the Code will also be excluded. This provides that a Code agreement must contain such terms as the Court thinks appropriate. In contrast, a 1954 Act agreement would, on renewal, either have its terms fixed by the agreement of the parties or paragraph 34 (12) of Part 5 of the Code. Paragraph 34 (12) states that the Tribunal must have regard to the existing terms of the tenancy when making the appropriate order.

However, it is not all good news for landowners.  When any new 1954 Act lease is close enough to its contractual termination date, the operator may give 6 months' notice in accordance with paragraph 33 of the Code and seek renewal in accordance with Part 5. Operators are therefore likely to seek as short a term as possible on any statutory renewals, so they can fall back on the full panoply of Code rights as soon as possible. If the term cannot be agreed then it will be for the Court to decide.

Therefore, any advantages accruing to a landlord or head lessor by virtue of the 1954 Act procedure, may well be short lived.