EE Ltd and another v AP Wireless II (UK) Limited [2024]: a change in the landscape for telecoms lease negotiations

The case of EE Ltd and another v AP Wireless II (UK) Limited [2024] involved a renewal lease for an EE Ltd and Hutchison 3G UK Ltd (the Operator) telecoms mast at a greenfield site in Buckinghamshire. The Operator and landowner (AP Wireless II (UK) Limited (APW)) agreed a new ten-year lease in principle but disagreed on two key points: termination on the grounds of landlord redevelopment (which we will focus on) and the amount of rent. Regarding the former, APW sought to include a break clause for both (1) redevelopment, and (2) where paragraph 21 of the Electronic Communications Code (the Code) (the public benefit test) was no longer met. The Operator sought to limit this redevelopment break to be exercisable only after five years and so that the break did not apply to “redevelopment” which included creating another electronic communications site, ie if the site provider wanted to replace the current Operator’s equipment with their own.

Under telecoms agreements, operators have a statutory right to remain similar to security of tenure. Therefore, to terminate Code agreements landlords must terminate the contractual and statutory rights. To terminate the statutory rights landlords must serve a notice pursuant to paragraph 31 of the Code, providing at least 18 months’ notice. Additionally, the agreement can only terminate after the date the Code rights under the agreement would cease to apply (ie after a break date or the contractual expiry of the term). Therefore, landlords will try to include a redevelopment break rights within the agreement/lease. This gives landlords flexibility to allow them to serve paragraph 31 notices to terminate the lease earlier (ie on the break date), rather than waiting until the end of the term. Instead, operators will often resist a landlord redevelopment break, as this means the landlord may only serve a paragraph 31 notice to bring the agreement to an end after the contractual expiry date. Operators require certainty of term, so argue that landlords should only be able to rely upon serving a paragraph 31 notice after the contractual expiry date.

In this case, the Tribunal ordered a redevelopment break after the fifth anniversary, and every subsequent anniversary of the term, exercisable if APW intended to redevelop all or part of the mast site (including for telecommunications purposes) and could not reasonably do that without the lease being terminated. In addition, the Tribunal ordered that there is no need for the redevelopment to be for items other than electronic communications. Assuming this approach is followed elsewhere, this has the effect of keeping redevelopment rights broad, so that site providers or companies such as APW who install their own masts may evict existing operators and replace them with their own equipment.

However, the Tribunal declined the APW’s request that the break could be exercisable if the paragraph 21 test (the public benefit test) was not met. While this is a ground to bring a code agreement to an end after its initial contractual term, the Tribunal did not see how this would be appropriate during the course of the agreed contractual term. If this approach is continued more widely it will provide Operators with comfort as to the security of their initial term.

In reaching this decision, the Tribunal stressed that the Code is not designed to prohibit a genuine intention to redevelop land, even for telecommunications uses.

This judgment is significant due to the future opportunities it creates for companies such as APW. A key focus of the wider business that APW is part of is installing its own telecommunications apparatus and infrastructure, including replacing, renewing updating existing masts/apparatus on land which APW or related entities have purchased.

This decision shows the Tribunal’s support for the principle of balancing the respective interests of Operators and landowners, allowing redevelopment (including for telecommunications) “even if the net result is that a particular operator may in the future enjoy less favourable terms at that site than if its previous lease of the land had continued”.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, November 2024