In August 2022, the Upper Chamber of the Lands Tribunal identified a major structural defect in the Electronic Communications Code which sterilised land from development if there was an intermediate lease structure in place. The case was Vodafone Limited v Gencomp (No.7) Limited and A P Wireless II (UK) Limited (LC-2021-613) and you can read our blog post here for further details.

Interestingly, the Gencomp case wasn't in fact about development. Vodafone wanted to renew its Code agreement (granted in the form of a lease) and whilst the original site provider and the intermediate landlord were happy to do so, no-one could work out who should be the correct party to terminate the existing Code agreement and grant the new one.

The issue turned on paragraph 10 of the Code, which sets out who is bound by a Code right. It includes:

  • an occupier with an interest in land who conferred the Code right (we'll call them "O")
  • a successor in title to O (ie a purchaser of O's property interest) ("P"); and
  • any subleases created out of O's interest after the Code rights had been granted ("S").

Paragraph 10 states P is treated as a party to the Code agreement, alongside O, but it is silent on S.

The importance is that Part 5 (termination and modification of a Code agreement) can only be triggered by a notice served by or on "a site provider who is a party to a Code agreement". So whilst O, P and any S are all bound by the Code agreement, it is only O or P who are treated as parties to the Code agreement.

As a worked example, and using our labels above, a freehold owner of an office block (O) may grant a Code agreement via a lease to a telecoms operator to install a mobile phone aerial on the roof. The freehold owner then sells the building to P. P grants a long leasehold interest to the building occupier (S), which includes the roof. This is a concurrent lease, as S takes the property subject to the Code agreement lease. Some years down the line, S wishes to redevelop the roof and convert it to a terrace, green space and install solar panels. The outcome of the structural defect identified by the Tribunal is that S, whilst the competent landlord of the operator under landlord and tenant principles, is not treated as a party to the Code agreement. So S could not serve a termination notice. P, whilst treated as a party to the Code agreement, is not the occupier (ignoring the operator) and so is also not the correct person to serve the notice either. It left developers in an undesirable hiatus, particularly when concurrent/intermediate leases are commonly used for finance and tax reasons.

Fortunately, in a judgment released in July 2023, the Court of Appeal overturned the Tribunal's decision. The Court of Appeal followed the Supreme Court's approach to interpretation of the Code adopted in the case of Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd [2022] UKSC 18. The Supreme Court had to decide who was "the occupier" in circumstances where the operator would normally be regarded as in occupation of the site. The guidance given by Lady Rose was to work out how the Code was intended to work and then consider what meaning should be given to the word "occupier" so that it does.

Applying that approach, the Court of Appeal found that:

"the regime is intended to work in such a way that the person currently entitled to the benefit and burden of the agreement as operator, and the person currently entitled to the benefit and burden of the agreement as site provider, are parties to the agreement and can exercise the rights conferred by Part 5 of the Code."

The result is that the intermediate landlord, S, being entitled to both the benefit and the burden of the Code agreement lease by virtue of the concurrent lease, is to be regarded as a "party to the agreement" with the result that it can invoke the termination provisions in Part 5.

A big question does remain over the treatment of Code agreements granted to operators other than in the form of a lease (such as a wayleave) where a lease has subsequently been granted to S. Landlord and tenant principles will not fill the gap to pass the benefit and burden of the Code agreement to S and the structural defect remains. The Court of Appeal accepted that the answer to this question is not obvious, but it did not need to deal with it in this case. Given the importance of the issue, we may well see an appeal to the Supreme Court but developers with concurrent lease structures will take some comfort from this judgment in the meantime.

Vodafone Ltd v Potting Shed Bar & Gardens Ltd (formerly Gencomp) & AP Wireless [2023] EWCA Civ 825

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.