Code rights do not terminate when Code agreements expire. Paragraph 30 of the Electronic Communications Code provides that they continue until terminated – on a date falling 18 months after the service a termination notice under paragraph 31 of the Code.
There are several grounds for terminating a Code agreement. EE Ltd v Edelwind Ltd [2020] UKUT 0272 (LC) concerned paragraph 31(4)(c) of the Code, which applies when a site provider intends to redevelop all or part of the land to which the Code agreement relates, or any neighbouring land, and cannot reasonably do so unless the Code agreement ends.
The solicitors acting for the tenant of a building in London had served a notice on the operator terminating a Code agreement affecting the rooftop of the building that it occupied. The notice was served on 23 December 2019 and terminated the agreement in question on 30 June 2021. But it was preceded by a notice served on 19 December 2019, from the same solicitors acting on behalf of the freeholder, that expired on 24 June 2021. That earlier notice puzzled everyone, until it became clear, during the proceedings that followed, that the freeholder’s notice related the provisions of a licence granted by the freeholder permitting the tenant to grant the Code rights to the operator and agreeing to be bound by them. Were the notices invalid because they were served too early?
The Code agreement granted by the tenant included a break clause enabling the tenant to terminate on 12 months’ written notice if it were to obtain planning permission for a development that it could not carry out with the operator’s equipment in place – failing which the agreement was to expire on 29 November 2024. But the tenant had not exercised the break option. It, and the freeholder, chose to rely instead on the exercise of a break right included in the tenant’s lease, enabling the tenant to terminate its lease on 2 April 2021.
The operator argued that the tribunal could not simply assume that the tenant’s lease would end on the break date because the break clause was conditional on the payment of rent and the provision of vacant possession (other than as regards telecommunications equipment). But the tribunal decided, on the balance of probabilities, that the tenant’s lease would end on 2 April 2021 – and, because the Code rights were derived from the lease, they would terminate then too, but for the effect of paragraph 30 of the Code.
Was the freeholder’s agreement to be bound by the Code rights truncated by the exercise of the break right? The parties had entered into the licence while the previous Code was still in force. It was granted so that the tenant could confer Code rights without breaching the covenants in its lease. Also, the Code rights were granted until 2024 and the tenant’s lease did not expire until 2027. So the freeholder had not granted the licence to validate rights that exceeded the term that the tenant could grant – and the licence did not indicate that the freeholder was agreeing to be bound for longer.
The parties could have provided that the freeholder would continue to be bound by the Code rights, even if the lease were to determine prematurely. But they had not done so. So, because the Code rights were derived from the lease, they were vulnerable to the exercise of the break right – and the notices were valid.
Allyson Colby, property law consultant
