Telecommunications – Code agreement – Lease or licence – Appellant landowner granting respondent code operator rights to install and operate telecommunications equipment – Issue arose whether agreements taking effect as leases or licences – Whether one agreement granted for term certain – Whether either or both agreements granting exclusive possession of defined area of land to respondent – Appeal allowed in part
An issue arose concerning the status of two agreements, each relating to the installation and operation of telecommunications equipment in fenced compounds on land in open countryside at Sandbach, Cheshire (made in 1997 for a minimum of 10 years), and Hullbridge, Essex (made in 2002 for a term of 20 years).
Two references were made to the First-tier Tribunal pursuant to Part 5 of the Electronic Communications Code. The question in each case was whether the agreement took effect as a licence or a lease.
In each of those references, the respondent code operator sought the termination of the existing agreement and an order that the parties enter into a new agreement, pursuant to paragraph 34(6) of the Code. The appellant was the freehold owner of the respective areas of land which were the subject of each agreement. The FTT decided that each agreement constituted a licence, and not a lease.
If the agreements took effect as leases, they were not contracted out of the protection of Part II of the Landlord and Tenant Act 1954, but remained subject to that protection. Therefore, the references fell to be struck out, on the basis that the FTT had no power under paragraph 34(6) to terminate the agreements or order the parties to enter into new agreements. The respondent would have to seek renewal of the agreements, as leases, pursuant to Part II of the 1954 Act.
Held: The appeal was allowed in part.
(1) The question whether a contractual agreement for the occupation of land created a lease or licence depended upon whether the agreement granted exclusive possession of the relevant land for a term at a rent. Where it did so, and provided that the grant of exclusive possession was not referable to a legal relationship other than a lease, the result would be a lease. That was so whatever label the parties placed upon the agreement. It was necessary to look at the substance of the agreement: Street v Mountford [1985] 1 EGLR 128 applied. Addiscombe Garden Estates Ltd v Crabbe [1958] 1 QB 513, Clear Channel UK v Manchester City Council [2006] 1 EGLR 27 and Global 100 Ltd v Laleva [2022] EGLR 2 considered.
In the present case, if the totality of the rights and obligations in each agreement granted exclusive possession for a term at a rent, the result would be that each agreement took effect as a lease, even though it was not described as a lease and might not have contained the conventional language of a lease.
(2) In construing the provisions of the agreements, the ordinary principles of contractual construction applied: see Mexfield Housing Co-operative Ltd v Berrisford [2011] 3 EGLR 115.
The ultimate aim was to determine what the parties meant by the language used, which involved ascertaining what a reasonable person would have understood the parties to mean. As the agreements in the present case were commercial, entered into for business purposes by a commercial entity, business common sense had a role to play in the construction process.
The relevant reasonable person was one with all the background knowledge available to the parties at the time of the contract. That required examination of the circumstances in which the agreement was made.
(3) The Electronic Communications Code did not exist in a legal vacuum. It was subject to the ordinary law of landlord and tenant, where relevant. The same applied equally when considering an agreement which was subject to the Old Code when made. In considering whether an agreement subject to the Code (or the Old Code) created a lease or a licence, the principles in Street v Mountford [1985] 1 EGLR 128, and subsequent case law, continued to apply. The fact that the agreement was subject to the Code (or the Old Code) might be relevant context, but it did not alter the overall approach: Vodafone Ltd v Potting Shed Bar and Gardens Ltd [2023] EGLR 31 followed.
(4) In the present case, it was not in dispute that the tariff payable under each of the agreements was capable of functioning as rent, nor that the 2002 agreement was entered into for a term certain, namely 20 years.
Two elements were necessary for a party to have legal possession of premises: (i) factual possession (a sufficient degree of physical control and custody); and (ii) an intention to possess (an intention to exercise custody and control on one’s own behalf and for one’s own benefit): JA Pye (Oxford) Ltd v Graham [2002] PLSCS 163; [2003] 1 AC 419 applied.
The question of what acts constituted a sufficient degree of “exclusive physical control” depended on the circumstances, in particular the nature of the relevant land and the manner in which it was commonly used or enjoyed.
(5) It was an important feature of the present case that there were considerable similarities, both as between the terms of the agreements and the evidence of the circumstances in which they were entered. In each agreement, an extensive bundle of rights had been granted for equipment to be installed and operated within an enclosed compound.
The judge was wrong to decide that the 2002 agreement took effect as a licence rather than a lease. It was not in dispute that that agreement was entered into for a term certain, at the equivalent of a rent. It was also effective to grant exclusive possession. The correct conclusion was that the agreement took effect as a lease.
(6) The provision in clause 2.1 was that the 1997 agreement was for a “minimum term of 10 years” continuing thereafter, subject to 12 months’ notice to terminate at any time by either party. That was not sufficiently certain to grant a lease.
Clause 2.1 was incompatible with the agreement taking effect as a lease granted for a fixed term of 10 years, following by a periodic tenancy. The agreement was entered into for an initial term of 10 years, which was certain. Thereafter, however, the effect of clause 2.1 was that the term continued on a basis which was not a periodic tenancy and did not qualify as a term certain. Therefore, the 1997 agreement took effect as a licence.
David Holland KC and Wayne Clark (instructed by Freeths LLP) appeared for the appellant; Oliver Radley-Gardner KC (instructed by Gowling WLG (UK) LLP) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of AP Wireless II (UK) Ltd v On Tower UK Ltd
