Ten year lease term with breaks awarded for telecoms renewal

On 21 August 2020, a judge made the first ruling on the length of an "old code" term on the statutory renewal of an telecoms mast lease.

"Old code" ruling

Martin Rodger QC ruled that the lease term which was "reasonable in all the circumstances" required by Section 34 of the Landlord and Tenant Act 1954 ("LTA1954") was a ten years with a six month rolling break, exercisable after five years.

Martin Rodger QC is the President of the Upper Tribunal (Lands Chamber) and determines a large proportion of electronic communications code cases, however as this was a LTA1954 lease renewal, in this instance, he sat as a judge in the Manchester County Court.

The renewal was dealt with under the "old code", as the lease was an LTA1954-protected "subsisting agreement" when the new code came into force on 28 December 2017. 

Rent

The "old code" market rent meant that the rent payable was higher than under the "new code" compensation. Rent was assessed under Section 34 of LTA1954 as an "open market" rent for a new lease of £5,750.

Valuation evidence showed that the "new code" compensation - which would have been payable under paragraphs 25 and 83 to 86 of the New Code for the imposition of an agreement - at around £2,250 per annum.

The principal difference between the two valuations was the valuation assumption that the subject site has been advertised and marketed between a willing landlord and tenant, although in reality mast sites are not marketed in this manner. In the real world, communications operators, and their joint ventures such as CITL, identify sites approach the owners. Recently, at least, that negotiation is seldom between willing parties; owners are generally reluctant to agree the siting of new masts on their land due to the hindrance they pose to redevelopment and the very low rents available.

Mr Rodger QC was satisfied that there was a "market" for the site in this case as there was evidence that four operators already occupied the same site. He noted however that:

“the same might not be true for sites which satisfy the needs of only one operator and which would not be of interest to competitors. In such cases the Code’s no-network assumption may cause the parties to agree a rent reflecting only the value of the site to the owner and the other consideration which [Vodafone] identified”.

Another feature of the renewal under the old code is that the landlord is entitled to "interim rent" during the holding over period under Section 24C of LTA1954 - which in this case was agreed at £6,750 per annum.

Lease term and break right

The duration of the new tenancy fell to be determined under Section 33 of the 1954 Act - a term which is "reasonable in all the circumstances, being, if it is a tenancy for a term of years certain, a tenancy for a term not exceeding fifteen years". 

Vodafone sought a term of 3 years with a rolling tenant’s break clause exercisable on 6 months’ notice. Its landlord, Hanover, asked for a term of 10 years with a break after 5 years (or on 12 months’ notice in the event of the tenant losing its operator’s licence or the Site becoming unsuitable for telecommunications use).

Mr Rodger QC determined that in order to achieve a balance between the operator’s commercial need for flexibility and the landlord’s interest in certainty of term the appropriate term length was ten years with a six month rolling break, exercisable after five years. 

A copy of the judgment for this case, Vodafone Limited v Hanover Capital Limited [2020] EW Misc 18 (CC) is available here.

Howard Kennedy's Real Estate Disputes Team deals regularly with complex and contested electronic communications matters for landowners and developers. We work closely with our Development Team to resist the imposition of, and minimise the impact of the presence of, electronic communications apparatus. In particular, we have extensive expertise in negotiating "lift and shift" provisions and the reservation of redevelopment rights in telecoms agreements.