Ashloch appeal confirms position on lease renewal
Cornerstone Telecommunications Infrastructure Limited v Ashloch Limited (1) and AP Wireless II (UK) Limited (2021).
The lease in this matter was granted in 2002 and at the time the new Code came into force on 28 December 2017, continued under s24 of the Landlord and Tenant Act 1954 (the 1954 Act). CTIL had given notice under paragraph 20 of the Code for a new agreement to be granted in accordance with Part 4 of the Code. The landlord, APW argued that the only way CTIL could obtain new rights over the site was by following the renewal process in the 1954 Act rather than that under the Code.
At the original hearing in the Upper Tribunal in 2019 the Deputy President, Martin Rodger QC, agreed with APW and ruled that CTIL could only renew in accordance with the 1954 Act. CTIL appealed.
The Court of Appeal reviewed the key provisions of the Code, in particular the transitional provisions. It was noted that the purpose of the transitional provisions were to provide continuity in the law and in doing so, policy choices about when and in what circumstances the new law is expected to apply had to be made. Under the transitional provisions operators occupying pursuant to rights conferred by a lease which enjoys security of tenure under the 1954 Act are precluded from renewing under Part 5 of the Code and instead have to renew under Part II of the 1954 Act albeit once granted, the new lease would be a Code agreement if its primary purpose is to grant Code rights.
In considering whether CTIL should nevertheless be permitted to apply for a new agreement under Part 4 of the Code, the Court of Appeal highlighted the problems that would arise if an operator in the above position had an unfettered right to obtain a new lease either by the imposition of a new agreement under Part 4 of the Code or by renewing its existing lease under the 1954 Act. Firstly the notice period required under the Code is much less than that required under the 1954 Act. Secondly, the operators would be able to escape the provisions of s34 of the 1954 Act for determining rent and instead be able to have the site valued in accordance with the presumptions of paragraph 24 of the Code, which includes the no network assumption. It was also noted that an operator in this position could require the Tribunal to impose an agreement which gives effect to the Code with such modification as the Tribunal thinks appropriate rather than on the basis that the existing agreement is the starting point for the renewal lease.
It appeared to Lewison LJ that many of CTIL's arguments were complaints about the way the transitional provisions of the Code work, rather than defects in the Code itself. He acknowledged that some operators would be left out in the cold as consequence of the transitional provisions but the statutory intention behind the Code was for it not to apply retrospectively to subsisting agreements.
Davis LJ agreed and said '…if, as Cornerstone contended, Part 4 of the Code is to be available in the case of a subsisting agreement to which Part 2 of the 1954 Act applies then…..there is potential both for confusion and for conflict between the two different regimes. It is very difficult to think that that could have been intended.'
While the judgment provides certainty and is one that landlords will welcome more eagerly than operators, further changes to the Code are likely to be implemented as a result of the consultation on Code reform published by the Department for Digital, Culture Media and Sport on 27 January 2021. The closing date for comments on the consultation is 24 March 2021. So this rare win for landlords may be shortlived.