Important legal change in the interplay of contractual and statutory break notices under the Electronic Communications Code

Summary

Overturning a previous Upper Tribunal decision, the Court of Appeal has decided that where the service of a statutory termination notice under the Electronic Communications Code is based on a contractual break option within the Code agreement, the contractual break notice must be served and exercised validly in accordance with the agreement. The Code does not treat the agreement as terminated simply on the basis that the contractual break option is exercisable, without it actually having been exercised.

The Facts

In ON Tower UK Limited v British Telecommunications PLC [4 July 2025], BT operated a telephone exchange, on the roof of which On Tower managed various mobile telephone installations. In 2021 BT granted On Tower a lease of various properties including part of the roof of the exchange for a term ending in 2030, but with a contractual right for BT to end the lease early.

On Tower UK Limited is a Code operator meaning that it can potentially benefit from statutory rights under Schedule 3A to the Communications Act 2003 (the “Code”).

In October 2022, BT sought to trigger an early lease termination by serving two notices on On Tower: a contractual notice pursuant to the lease and a statutory notice pursuant to paragraph 31 of the Code to bring the Code agreement to an end. On Tower issued a counter-notice and contended that the lease was a Code agreement and that the Code notice was invalid.

Issue

If the terms of a “Code agreement” (such as a lease or a wayleave) include a contractual break option, a termination notice under paragraph 31 of the Code must also be served to end the agreement. The contractual break option is the basis or trigger for giving the paragraph 31 notice. Before the Upper Tribunal decision, it had generally been considered that not only the statutory termination notice had to be served but also the contractual break notice.

Upper Tribunal decision

The Upper Tribunal, however, decided that there was no legal requirement for the landlord to have served the contractual break notice in addition to the statutory termination notice. It sufficed that the break option was exercisable by the landlord without it actually having been exercised.

The Upper Tribunal then held that the paragraph 31 notice and the contractual break notice served by BT were valid.

Court of Appeal decision

The Court of Appeal overturned the Upper Tribunal’s decision.

The Court decided that the site provider must serve a valid contractual break notice as well as the paragraph 31 notice. The Code does not treat the agreement as terminated simply on the basis that the contractual break option is exercisable. So, to bring the Code agreement to an end based on a contractual break notice, both the contractual and statutory notices need to be served and validly exercised.

The parties to the Code agreement (whether the site provider or the operator) are held to its terms until it contractually expires or it is terminated contractually by one or other party serving a valid notice to quit or break notice. A party can only propose, in a notice under paragraph 33 of the Code, that the agreement is modified or replaced by a new Code agreement from a date which falls after the date when the contractual agreement has expired or been terminated.

If there is no provision in a Code agreement for termination before the expiry date, a site provider cannot rely on paragraph 31 of the Code to terminate the agreement before that date.

Where a Code agreement contains a contractual break option exercisable by the site provider serving a notice relying on specified grounds, and subject to conditions, whether precedent or subsequent, the Code does not override those contractual terms. The break option has to be exercised by the landlord validly in accordance with the terms of the lease, in order to be able to terminate the Code agreement.

In the case itself, the Court then held that BT’s contractual break option was not "exercisable" in the circumstances and consequently the paragraph 31 notice also served by BT was invalid.

Implications

The previous Upper Tribunal decision was somewhat surprising, since usually both contractual and Code notices are needed to be served to terminate a Code agreement. So, the Court of Appeal’s decision restores what many thought the position to have been. A site provider cannot serve a paragraph 31 notice without actually serving a valid contractual break notice first, complying with any required grounds and conditions.