Case Update - Clarity on the Electronic Communications Code

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11 June, 2020

Stephen McArdle
Partner, Head of Commercial Litigation

Vodafone Enterprise UK v Portsmouth Water Ltd (unreported)

A recent unreported decision of the County Court has clarified the court's position in relation to the valuation to be used for the renewal of an existing electronic communications lease under the Landlord and Tenant Act 1954.

The Electronic Communications Code

In January 2020, we discussed the Electronic Communications Code ("the Code") and the procedure telecommunications operators should adopt in order to renew an existing electronic communications lease, in a case update on Cornerstone Telecommunications Infrastructure Limited v Ashloch Limited, AP Wireless II (UK) Limited. However, this case did not go into detail on how rent should be calculated under such a renewed lease.

Paragraph 24 of the Electronic Communications Code provides that the rent payable under an electronic communications lease must be an amount representing the market value of the relevant person's agreement to confer or be bound by the code right.

However, section 34 of the Landlord and Tenant Act 1954 states that rent may be calculated by the court (in absence of an agreement) as the value which the site might reasonably be expected to be let in the open market by a willing lessor.

On the face of it, it is not clear which of these approaches should be taken in relation to an electronic communications lease. The recent decision in Vodafone Enterprises UK v Portsmouth Water Ltd, helped to provide some clarity in this area.

The Facts

Vodafone was the tenant under an existing electronic communications lease at a site in Portsmouth. The contractual term of Vodafone's lease expired on 1 June 2011, but the tenancy continued by operation of section 24 of the Landlord and Tenant Act 1954.

Vodafone issued proceedings under this Act for a new lease on 3 November 2017. APW Wireless (II) UK Ltd ("APW") became the landlord on 31 July 2019 and was joined to the court proceedings in October 2019.

A single joint expert was appointed to provide a valuation report on the level of rent and interim rent due under sections 24 and 34 of the Landlord and Tenant Act 1954. A dispute shortly arose, as Vodafone requested that the expert undertake the valuation under paragraph 24 of the Code.

APW maintained that the Landlord and Tenant Act 1954 was the relevant authority by which a valuation should be undertaken, and so applied to the court to determine the appropriate legal basis on which a valuation should be made.

The Decision

The County Court decided that, if valuations take place under the Code, then the rent would be less than if the valuation took place under the Landlord and Tenant Act 1954, as the former fails to take account of the telecommunications value of the land subject to the lease.

Therefore, following the renewal of an existing electronic communications lease under the Landlord and Tenant Act 1954, the rent payable should be calculated under that same Act and not the Code.

This decision provides clarity to landowners and operators alike as to the correct procedure under which rent should be calculated when renewing an electronic communications lease. It also provides good news for landowners who risk being faced with low offers of new rent from telecommunications operators when renewing their leases.

For more information contact Stephen McArdle in our Business Dispute Resolution department via email or phone on 0333 207 1142. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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