Lease or licence? Why the difference is crucial for renewing telecoms apparatus agreements

6 minute read
18 January 2023

When applying to renew an agreement for telecommunications apparatus, it is important to understand whether the agreement is a protected lease and falls under Part II of the Landlord and Tenant Act 1954, or is a licence and may be renewable under the Electronic Communications Code (Schedule 3A to the Communications Act 2003 ("the Code")). The process to renew under the Code and the 1954 Act is different, in different courts, with different timescales and comparables. Therefore both operators and landowners should take the time to understand what kind of agreement they have.

Gowling WLG successfully acted for On Tower UK Limited in On Tower UK Limited v Robert Graeme Allison and others [LC-2022-000322], where the First-Tier Tribunal was asked to determine as a preliminary issue whether On Tower's existing subsisting agreement was a lease or a licence.

Is it a Lease or Licence?

On Tower was occupying the site under a "minimum term agreement," which is  an agreement with an agreed minimum term of 10 years which then rolled on from year to year. The agreement was terminable at any time on not less than 12 months' written notice by either party after the original 10 year period. The Tribunal determined that the Minimum Term Agreement was in fact a licence, and therefore the Tribunal did have jurisdiction to renew the agreement under Part 5 of the Code. This was for the following reasons:

Exclusive possession

The Tribunal considered that the rights granted within the existing agreement did not create exclusive possession. The rights which were granted included the following:

  1. Lesser rights - The agreement did not contain any express grant of exclusive possession to the site. Instead, it conferred rights such as to: install, operate, maintain, repair and renew telecoms equipment on the site. The Tribunal determined that these "lesser rights" did not amount to exclusive possession in itself.
  2. Restricted access - The right of access over the premises was expressly limited to access on reasonable notice, and also limited to access as was reasonably necessary for the installation, operation, maintenance, repair and renewal of the telecoms equipment. The Tribunal held that such a requirement was difficult to reconcile with the grant of exclusive possession.
  1. Not a tenant's fixture - The agreement stated that the equipment shall belong to the operator "as if it were a tenant's fixture". The Tribunal found that this implied that the equipment is not in fact a tenant's fixture, as it is not a lease.
  2. Sharing - The agreement allowed the operator to switch their telecoms equipment with other equipment that "is already installed" if it was interfering with the operation of their equipment. Although there was no existing equipment already installed on the site, the inclusion of this clause contemplated shared - and therefore not exclusive - use of the site. The Tribunal determined that including provisions for sharing was not indicative of exclusive possession.
  3. Binding successors - The agreement expressly stated that the parties intended for the agreement to continue to bind successors in title - a statement which would normally be consistent with the grant of a lease. However, the Tribunal found that this must be read in context, as this agreement was made under the Old Code, where paragraph 2 of the Old Code made clear that agreements could be made by either lease or licence, but both can be made binding upon successors in title. This clause was therefore not inconsistent with the agreement's status as a licence.

Certainty of term

Certainty of term is fundamental for the existence of a lease, and the maximum duration of a lease must be ascertainable at the start of the lease. The Respondents argued that the agreement created a tenancy for a fixed term of 10 years followed by an annual periodic tenancy. By contrast, On Tower argued that the agreement did not create a periodic tenancy, either from the outset or after the minimum 10-year term because the mechanism for termination - not less than 12 months' notice given at any time to expire on any date - meant that there was no relevant "period" and no period tenancy. The Tribunal agreed with On Tower's argument and the agreement was therefore not an annual periodic tenancy that would have had to have been terminable at the end of any year.

Agreement as a whole

The Tribunal also provided the following general commentary: although the lease/licence distinction was less significant under the Old Code, when this agreement was entered into, if the parties had in fact intended to grant a lease:

  1. it is likely they would have included express wording to that effect; and
  2. the agreement would have been granted by deed (to ensure it took effect as a legal lease in accordance with section 52(1) of the Law of Property Act 1925).

This reminds us that the Tribunal will consider the agreement as whole, and consider the intention of the parties at the time.

Practically, what does this mean?

It is important to understand from the outset whether the agreement is a lease or a licence. If an agreement is a protected lease and falls under Part II of the Landlord and Tenant Act 1954, it should be renewed under the 1954 Act in the Country Court. However, if the agreement is a licence, it should be renewed under the Code in the Tribunal.

If you would like to discuss whether a telecoms agreement is a lease or a licence and the implications of any applicability of the Code or the 1954 Act, please contact Martin Thomas or Minerva Christiaan-Rakus

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