The Court of Appeal has handed down its judgment in Vodafone Ltd v Potting Shed Bar & Gardens Ltd (formerly Gencomp (No 7) Ltd) & AP Wireless II UK Ltd. Overturning the decision of the Upper Tribunal, the Court clarified that tenants who are granted a concurrent lease subject to a Code agreement (i.e. an agreement to an operator with rights under the Electronic Communications Code (the "Code")) are capable of terminating the Code operator's agreement.
The Facts
Vodafone Ltd occupies a site in Bingley, Yorkshire pursuant to a lease granted in 2003 by the previous freehold owner. In 2018 the current freeholder, Potting Shed Bar & Gardens, granted a concurrent lease to AP Wireless. A concurrent lease is a lease of land, which is already subject to a lease, and that will run at the same time as that other lease. The tenant of the concurrent lease (here: AP Wireless) usually acquires the superior landlord's rights and obligations in connection with the other lease (here: Vodafone).
The question the Court of Appeal had to decide was whether AP Wireless could serve or receive a notice to trigger the renewal mechanism under the Code.
The Upper Tribunal
The first instance decision highlighted a gap in the drafting of the Code. The Code provides that successors in title to the party that originally granted the Code agreement are bound by that agreement. However, AP Wireless is not a successor in title to the freeholder, accordingly the Upper Tribunal concluded that they had no rights to terminate Vodafone's agreement. Problematically, the current freeholder was also unable to terminate the agreement as they had granted the concurrent lease to AP Wireless and therefore had no right to grant a further agreement. Only Vodafone was capable of seeking new rights through the Code procedure.
Structure prior to grant of concurrent lease
Structure following grant of concurrent lease
As concurrent leases are often granted for development purposes, which require vacant possession, the Upper Tribunal's decision left tenants of concurrent leases subject to Code agreements in a very unsatisfactory state of limbo.
The Court of Appeal
The appeal was heard on 10 and 11 May 2023. In a detailed judgment Lord Justice Nugee grappled with the wording of the Code, which provides that only a party to a Code agreement can terminate it or respond to an operator's application for new rights. He concluded that although he agreed that AP Wireless was not a successor in title to the entity that originally granted the Code agreement, the provisions of the Code setting out who is bound by a Code agreement are not intended to be exhaustive. Instead, those entitled to the benefit and burden of the agreement are deemed to be parties to that agreement and can exercise the rights conferred by the Code. On that basis AP Wireless is entitled to terminate the Code agreement.
Implications
Tenants under concurrent leases granted for development purposes will breathe a sigh of relief. The Court of Appeal's practical approach removes the uncertainty created by the first instance decision. It remains to be seen whether Vodafone will seek to appeal, but for now some common sense has prevailed.