Electronic communications lease renewals - guidance for landlords on the relationship between the 1954 Act and the Code

Electronic communications lease renewals - guidance for landlords on the relationship between the 1954 Act and the Code

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Vodafone Ltd v Hanover Capital Ltd [2020] 8 WLUK 180

The County Court has issued the first known judgment, since the introduction of the new Electronic Communications Code (the Code), determining the terms of a lease renewal under the Landlord and Tenant Act 1954 (the LTA 1954) relating to an electronic communications site. The details and outcome of the case could be helpful to landlords negotiating lease renewals in similar circumstances.

Background

Vodafone had a lease of a telecommunications site in Manchester which had expired, and under the LTA 1954, Vodafone applied to the court for a new lease in 2017. However, Vodafone and the landlord could not agree on the term of the lease or the level of rent.

As the lease was a “subsisting agreement” under the Digital Economy Act 2017, the terms of such a renewal are determined using the procedure set out in section 34 of the LTA 1954 and not as set out under the Code (this was confirmed in the Upper Tribunal decision of Cornerstone Telecommunications Infrastructure Ltd v Ashloch Ltd [2019] UKUT 338 (LC)).

Court’s decision – term

Vodafone wanted a three-year term, with a six month rolling tenant break option. The landlord wanted a 10 year lease with a tenant break option after five years.

The court granted a 10 year lease with a six month rolling tenant break, exercisable after the first five years. The court held that this represented a fair balance between Vodafone’s desire for flexibility and the landlord’s desire for certainty. In addition, the court took account of the original agreement between the two parties, which was agreed in 2008 and provided for a five-year term.

Court’s decision – rent

In respect of the rent, Vodafone’s position was that the rent should be assessed using the mechanism set out in the Code, which discounts the proposed use of the land as a telecommunications site. The landlord argued that account should be taken of the value of the site to Vodafone.

The court held that the rent would be determined in accordance with the provisions set out in section 34 of the LTA 1954. This requires an assumption to be made that there is a competitive bidding process, and as this site was of potential interest to other telecommunications operators this delivered a higher rent.

Using the mechanism in the Code would have provided for a rent of £2,200 or £2,250 per annum but using the procedure set out in section 34 of the LTA 1954, the court determined a rent of £5,750.

Practice points

Although this is a County Court judgment and could be subject to appeal, this case gives some guidance to landlords on the terms that courts will determine in instances such as this, and may provide some comfort to landlords in negotiating renewals with operators.

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