On 25 July 2025, the Court of Appeal issued their decision in AP Wireless II (UK) Ltd v On Tower (UK) Ltd [2025] EWCA Civ 971 which has provided much-needed clarity on whether a "minimum term" property agreement creates a valid lease or merely a contractual licence.
This case – closely watched by property and telecoms professionals – turned on a fundamental property law question: does an agreement with an indefinite rolling term (after an initial minimum period) satisfy the requirements of a lease under English law, or is it just a licence?
The outcome carries significant implications for Electronic Communications Code (ECC) agreements, affecting renewal rights under property law and rent valuation. In this article, we break down the case, its context and provide key takeaways for landowners and telecommunications operators.
Partner and Head of Real Estate Litigation, Clive Chalkley acted for the successful respondent On Tower.
Case overview: lease vs licence in AP Wireless v On Tower
In this dispute, a telecoms operator (On Tower) occupied a site under an agreement originally granted in the late 1990s. The agreement allowed installation of telecoms masts and equipment on land. Crucially, the contract for the site included a "minimum term" provision: it guaranteed a minimum period of 10 years followed by the right for either party to terminate the agreement at any time after the initial 10 years on 12 months' notice. In other words, after the initial 10-year term, the arrangement could continue indefinitely until someone gave a year's notice.
The legal issue was whether this open-ended "minimum term" agreement created a lease (an interest in land for a defined term) or only a licence (a personal, contractual permission to occupy). Under property law, a valid lease traditionally requires exclusive possession of the land for a term that is certain (fixed or periodic) and usually at a rent. The Court had to examine the substance of the arrangement – not just what the parties called it – to determine its true nature.
Why classification matters: the ECC context
This lease-vs-licence distinction is more than academic – it has real financial and procedural consequences due to the ECC. The ECC (updated in 2017) governs rights and renewals for telecoms apparatus agreements. Many older site agreements (entered before the 2017 "New Code") are treated as "subsisting agreements" under transitional provisions. If a subsisting telecoms agreement is a lease (and not expressly excluded from the Landlord & Tenant Act 1954 protections), then any renewal or termination is governed by the 1954 Act – a regime generally favourable to the landowner.
If the agreement is a licence, however, the New Code applies. The Code's renewal framework is widely viewed as more operator-friendly mainly. A telecoms operator will generally want an arrangement to be a licence, whereas a savvy site owner prefers it to be a lease. This backdrop set the stage for the Court's decision in AP Wireless v On Tower. The classification would decide whether renewal of the mast agreement fell under the landlord-friendly 1954 Act or the operator-friendly Code.
The Court of Appeal decision: no "term certain," no lease
APW argued that the "minimum term" agreement should be classified as a lease for three reasons:
- Invalidating features argument: AP Wireless argued that the agreement did not suffer from either of the two features identified in the Mexfield case as invalidating a lease (i.e., an uncertain term or a fetter of uncertain duration on termination rights), and therefore it should be upheld as a valid lease.
- Interpretation argument: AP Wireless contended that as a matter of contractual construction the agreement created a valid fixed term lease for 10 years, with the ability for either party to terminate thereafter on 12 months' notice—making the term sufficiently certain.
- Inferred periodic tenancy argument: AP Wireless argued that, even if the agreement was void for uncertainty, the court should infer a periodic tenancy (as in Prudential) rather than treating the arrangement as a contractual licence.
The Court of Appeal rejected each of these arguments and has confirmed that the "minimum 10 years, then rolling" agreement did not create a valid lease under property law.
While the telecoms operator was granted exclusive possession of a defined site (the fenced compound housing the mast), the agreement failed the term requirement. The contract lacked a fixed or certain duration beyond the initial period – it could continue indefinitely as long as neither party served 12 months' notice. English law has long held that a lease must have a determinable endpoint or at least a cycle (period) that is certain from the outset. Because Clause 2.1 allowed termination on "any date" after the 10 years, there was no clear periodicity or final termination date. The Court agreed that this open-ended term was "not sufficiently certain to constitute a lease." Even though rent was paid and exclusive possession was given, the absence of a term certain was fatal to lease status.
As a result, the agreement was deemed to take effect only as a contractual licence – a personal right for the operator to occupy, rather than an estate in land. The Court's decision upholds the principle that parties cannot circumvent property law requirements by clever drafting or labels. Calling an arrangement a "licence" or giving it an indefinite rolling term won't avoid lease status if, in substance, it grants exclusive possession for a defined term – and conversely, an indefinite term cannot be a lease even if the parties hoped to treat it as one. The court looks at the practical effect and the agreement as a whole.
Key takeaways for landowners and telecoms operators
The overarching lesson is the importance of precise drafting.
All "minimum term" telecoms agreements should be reviewed in their entirety to ensure they meet the intended legal form.
If a lease is intended, make the duration unambiguous and "certain" from the outset. If a licence is intended, beware of inadvertently granting rights (like exclusive possession for a set term) that cross the line into lease territory.
This Court of Appeal decision serves as a clarion call to eliminate grey areas: clarity now can prevent costly disputes later.
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.
