Technical issues with the Electronic Communications Code and the contracting out process
Summary
The First-tier Tribunal has issued a decision which addresses some technical issues with the Electronic Communications Code (“Code”) and the process to contract leases out of sections 24-28 of the Landlord and Tenant Act 1954 (“1954 Act”). While the case relates to electronic communications agreements, some of the Tribunal’s comments on the contracting out process have a wider application. Also highlighted is a discrepancy in the Code’s transitional provisions which the Tribunal was able to deal with.
Detail
The First-tier Tribunal decision in EE Limited and Hutchison 3G UK Limited (“claimants”) v AP Wireless II (UK) Limited [8 August 2025] considered a number of preliminary issues relating to the Code and the process to contract leases out of sections 24-28 of the 1954 Act.
They arose out of eleven references brought by the claimants (as operators) by way of renewal under Part 5 of the Code following the expiry of subsisting Code agreements. It is advantageous for operators to renew their agreement pursuant to Part 5 of the Code rather than pursuant to the 1954 Act. With the Code there is a longer 18 months’ notice period to terminate the agreement, compared to the shorter notice period (as short as 6 months) under the 1954 Act. There may also be lower rents payable under an agreement renewed under the Code, compared to the generally higher rent payable under a renewal under the 1954 Act, although future legislation will harmonise the rent whether it is a Code or 1954 Act renewal.
If a lease is contracted out of sections 24-28 of the 1954 Act, the tenant does not benefit from the holding over, compensation and renewal rights provided by the 1954 Act. In the context of this case, whether the agreement was validly contracted out was crucial to the issue of whether the operators have a right to renew their agreements under Part 5 of the Code.
Contracting out issue
If a lease is to be validly contracted out of Landlord and Tenant Act 1954 protections, what is required is that third parties, assignees and mortgagees should know that the lease is one to which the relevant Part II of the 1954 Act does not apply and it is sufficient for there to be “some form of agreement which excluded the provisions of the Act”. The judge stated that perfection is not required and what matters is whether what has been done fulfils the statutory purposes.
One of the statutory requirements for a valid contracting-out under paragraph 6 of Schedule 2 to The Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 is that the agreement between the landlord and the tenant to contract-out is contained in or endorsed on the instrument (i.e. the agreement or lease). It was argued by the site provider that the endorsements in the relevant agreements did not satisfy the requirement with the effect that the agreement was not validly contracted out. The Tribunal rejected this argument, stating that the agreements included the contracting out agreement and this satisfied the statutory requirement in paragraph 6.
Defect in statutory transitional provision
The Tribunal highlighted a defect in the following statutory transitional provision for the Code which potentially impacted on the operator in this case -
Paragraph 6(2) of Schedule 2 to the Digital Economy Act 2017 states that:
“Part 5 of the new code (termination and modification of agreements) does not apply to a subsisting agreement that is a lease of land in England and Wales, if—
- it is a lease to which Part 2 of the Landlord and Tenant Act 1954 applies, and
- there is no agreement under section 38A of that Act (agreements to exclude provisions of Part 2) in relation the tenancy.”
This provision applies to agreements under the old Telecommunications Code that subsisted when the new Code came into force on 28 December 2017. The provision determines whether such subsisting agreements benefit from Part 5 renewal rights (which as mentioned are more advantageous to operators).
The problem with the statutory provision is that while it refers in paragraph b above to the current statutory provision for contracting out agreements in section 38A of the 1954 Act, it does not refer to the previous statutory provision for contracting out agreements in section 38(4) of the 1954 Act (which applied up to 1 June 2004). The argument put by the site provider was that, if the relevant agreement had been contracted out under the previous statutory provision (by way of a court order), because there was no reference in the statutory provision to section 38(4) for that previous process, the operator tenant could not renew the agreement under Part 5 of the Code.
The Tribunal rejected the argument. The effect of section 17(2)(b) of the Interpretation Act 1978 was that exclusion of 1954 Act protection under section 38(4) has the effect as if it was done under section 38A. Section 38A is “the functional equivalent” of section 38(4) and what was repealed was re-enacted with modification, so the practical effect was the same – the protections of the 1954 Act were excluded.
The Tribunal was therefore able to cure the defect in paragraph 6(2)(b) in the transitional provision by reading it as if contracting out under section 38(4) were done under section 38A. The tenant operator was therefore able to access Part 5 in respect of its agreement.
Does the contracting out endorsement in the lease/agreement overcome the loss of the warning notice and declaration?
The contracting out process involves the landlord serving a warning notice on the prospective tenant warning them of the statutory rights from which they will not benefit and the tenant then makes a simple or statutory declaration confirming that they accept the consequences of entering into the contracting out agreement. One of the functions of an endorsement of the contracting out agreement in a lease (or other agreement) is to ensure that important information is recorded in the principal document i.e. the lease. The Tribunal stated that if the actual warning notice or declaration was subsequently to be lost, the endorsement satisfies the evidential burden that on the balance of probabilities the landlords served notices and the tenants made declarations in the prescribed form. The Tribunal added that there is no requirement for notices and declarations to be kept. Their function has been fulfilled and their existence noted in the endorsement.
This confirmation from the Tribunal is very helpful for all contracting out agreements and not just in a Code agreement context.
Validity of notices - Paragraphs 33(3A) and 88(2) of the Code
As a result of section 69 of the Product Security and Telecommunications Infrastructure Act 2022 (“2022 Act”), which came into force on 7 November 2023, the OFCOM prescribed forms of Code notices changed to include information about alternative dispute resolution (“ADR”) and the consequences of refusing to engage.
While in this case the relevant Code notices did not include a reference to ADR and the consequences of refusing to engage, the notices were served at a time when section 69 had yet to come into force. There is no concept of retrospective invalidity. So, references could validly be made under paragraph 33 of the Code (to require a change to the terms of a Code agreement which has expired), reliant on notices that were valid when served.
The Tribunal rejected the argument that the effect of the 2022 Act was to make invalid all notices served prior to 7 November 2023. Nowhere in the 2022 Act was it suggested that all pre-existing notices are invalid, and clear wording would be required for a statute to have retrospective effect.
Even if there was a breach of statutory procedural requirements through the omission of the ADR information, the Tribunal considered that the failure to comply with paragraph 33(3A) did not preclude application to the Tribunal under paragraph 33(5). The presence of safeguards within paragraph 33 and the requirement to consider ADR at the point of application and the option for the other party to serve a notice if it wishes to engage in ADR all point firmly to the conclusion that the consequence of a non-compliant notice is not invalidity.
Other points
The Tribunal also addressed the issue of whether a reference is invalid where it is made jointly by operators A and B off the back of a notice given only by operator A which is the only party to the Code agreement to be renewed. The Tribunal can regularise the reference by removing the additional party under its case management powers (FTT Rule 10(1)), so that the reference does not have to begin again.
It is not an abuse of process for notices to be served without further steps being taken. The Code gives both the site provider and the operator the ability or the initiative to bring the matter to a head. The fact that a site provider might not wish to do so to continue receiving the higher Old Code rent showed that inaction caused little prejudice to the site provider.
Implication
Since this is a decision of the First-tier Tribunal its precedent status is somewhat limited. However, the Tribunal’s approach to some technical points relating to the contracting out process and to the Code is likely to prove generally useful.
