Notices to break and the electronic communications code - guidance for landlords

EE and H3G Ltd v Edelwind and Secretary of State for Housing Communities [2020] UKUT 0272 (LC)

The Upper Tribunal has handed down a ruling on the service of termination notices relating to code agreements. The ruling will be helpful to landlords seeking to terminate a code agreement in a similar situation.

Background

Edelwind is the freeholder of a property and the Secretary of State for Housing Communities is its immediate tenant. The tenant entered into a code agreement with EE which was due to expire in November 2024. Although granted under the “old” electronic communications code, the agreement was governed by the “new” electronic communications code due to the transitional provisions contained within the latter. EE subsequently assigned the benefit of the agreement to itself and H3G, however this was contrary to the terms of the code agreement.

In December 2019, the tenant served notice on the freeholder to end its lease of the property on 2 April 2021. Subsequently, the freeholder and tenant both served notice on EE proposing to terminate the code agreement in June 2021. Such notices were served in the form required by paragraph 31(1) of the “new” electronic communications code, citing that the freeholder intended to redevelop the building and could not do so without terminating the code agreement.

EE and H3G sought to challenge the validity of the notices terminating its agreement on two grounds:

1. That its contractual agreement did not end until November 2024 and so no notice could be served which expired before then
2. That the notices were only addressed to EE and not also to H3G

Dates of the notices

EE and H3G agreed that if the tenant’s lease was terminated then the code agreement would come to an end. However, they argued that as the break was conditional, there was no certainty the tenant’s lease would end on 2 April 2021 and therefore the termination notices served under paragraph 31(1) of the “new” electronic communications code were served prematurely and were invalid.

The court rejected this argument and found that on the “balance of probabilities” the tenant’s lease would end on 2 April 2021. The court held that when a break notice is served it indicates that the tenant wishes to terminate the lease and believes that it will be able to vacate the premises and satisfy the break conditions by the break date.

Addressees of notices

It is established that an assignment of a lease in breach of covenant is effective, however an assignment only of contractual rights (e.g. of a licence) is not. Therefore the court needed to determine whether the code agreement in question was a lease or a licence.

The court found that it was a licence as the code agreement did not grant exclusive possession and the operators had only limited access rights to the site. The assignment was therefore ineffective and the addressee of the notices did not invalidate them.

Practice points

This case highlights the relationship between break rights and code agreements, and provides guidance for landlords seeking to terminate a code agreement granted by a tenant whose lease is being brought to an end via a break clause.

The case also flags the importance of ascertaining exactly which operators are in occupation at a site, as in this instance if the code agreement had been a lease, the notices may have been served on the incorrect parties and might have been found to be invalid.