Property litigation weekly update  – 22 July 2021


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In this week's bulletin the team discuss the EE Ltd and Hutchison 3G UK Ltd v Stephenson and AP Wireless II (UK) Ltd [2021] UKUT 167 (LC) case and the Sturgiss & Anor v Boddy & Ors (2021) EW Misc 10 (CC) case. All this along with the usual positive news and insights from across the firm. 

EE Ltd and Hutchison 3G UK Ltd v Stephenson and AP Wireless II (UK) Ltd [2021] UKUT 167 (LC)

This is a telecoms case dealing with important questions of law and practice about when and how an application to the Tribunal for a new code agreement under the Electronic Communications Code 2017 (the Code), can be made.

The existing agreement was an expired lease which was validly contracted out of the security of tenure provisions of the Landlord and Tenant Act 1954 and, although granted before the Code came into force, was subject to the transitional provisions of the Code. Following the expiry of the existing agreement, the operators served a notice on the site provider pursuant to paragraph 33(1) of the Code, requesting termination of the existing agreement and the grant of a new agreement.

When terms could not be agreed, the operators made an application to the Tribunal under paragraph 33(5) of the Code for a new Code agreement under paragraph 34(6). The operators required a new agreement so they could take the benefit of the additional protections afforded by the Code in relation to sharing and upgrading and sought a reduction in the consideration payable from £5,693.64 per annum to £250 per annum. The site provider contended that a new agreement should not be granted because, among other things, the Operators' requirements were already met by the rights continuing under the existing agreement and it was more appropriate for the existing agreement to be modified under paragraph 34(2) of the Code. There were 2 preliminary issues to be determined by the Tribunal.

The first was whether the application for the grant of a new agreement should fail in the absence of a pleaded case as to the site specific need for a new agreement (as opposed to continuing with existing rights).

The second preliminary issue was whether the operators could instead pursue a case for modification of the existing agreement under paragraph 34(3) of the Code in the alternative, despite the relevant OFCOM notices not being served on that basis.

On the first issue the Tribunal found:

  • The application for the termination of an existing agreement and grant of a new agreement is not bound to fail in the absence of a site-specific case advanced as to why a new agreement is needed. The Tribunal considered that the policy reasons for introducing the Code (to confer broader rights and more flexibility on operators) meant that operators should not have to prove special justification for the grant of a new agreement complying with the Code.

On the second issue the Tribunal found:

  • Where the operators have not served a notice identifying that a different change to the existing agreement is sought, they cannot pursue a case for alternative relief. As the notice had been served on the basis of termination of the existing agreement, the operators could not hedge their bets and plead modification of the existing agreement in the alternative. A fresh notice will need to be served unless the site provider consents to the alternative approach.

Case Summary – the case of Sturgiss & Anor v Boddy & Ors (2021) EW Misc 10 (CC) considered the status of deposit payments given by tenants in shared houses, in situations where those tenants were replaced on an ad hoc basis over the years.

A group of people rented out a three bedroom house in 2004 as joint tenants. They paid the deposit due to the landlord and at that time the rules regarding the protection of deposits were not in force.

Over the years, the original tenants moved on at different times, and as they did, the outgoing tenant found a new tenant to replace them. The new incoming tenant paid the outgoing tenant their share of the deposit. Over the years, the landlord increased the rent and accepted the position of the replacement tenants, but did not actively participate in the selection or placement of the new tenant or receive the new deposit monies directly from the new tenant.

Two departing tenants then made a claim against the landlord for breach of the deposit protection rules.

There were three key issues considered by the court:

  1. Was there a series of surrenders and re-grants of new tenancies such that the deposit protection rules applied?

    a. At first instance, the court found for the landlord and considered there was no surrender and re-grant of tenancy with each new occupier, as the landlord was not actively consulted about the matter and did not have the opportunity to negotiate new terms.

    b. This decision was overturned on appeal. It was found that the landlord's acceptance of the new tenants amounted to a completion of the process of surrender and re-grant and it was not necessary for him to be aware of the replacement of tenants when or before it took place. The landlord had acted consistently with the termination of the tenancies and the acceptance of rent that was being tendered by the new tenant and so was estopped from then resiling from that position.
  2. Were the occupiers licensees so that the rules did not apply?

    a. At first instance, the court found that the new incoming tenants were mere licensees, on the basis of lack of exclusive occupation and a lack of a definable term or notice period.

    b. This was overturned on the basis that there was exclusive possession (there was no suggestion that the landlord could turn up at any time to take up occupation) and the rent was paid on a monthly basis, which suggested a monthly term. HHJ Luba QC found that the new incoming tenants had tenancies.
  3. Did the fact that the deposit monies were not paid to the landlord absolve him from any breach of the rules?

    a. At first instance, it was held that the "replacement" deposit monies were not paid to the landlord, and so the landlord could not be liable for penalty of breach of deposit protection.

    b. On appeal, it was found that the new incoming tenant should be treated as having paid the amount of the deposit to the landlord in respect of the new tenancy, by way of set off against the landlord's obligation to account to the tenant for the deposit in respect of the previous tenancy. The Judge commented that the alternative would lead to the artificial notion that the landlord would otherwise be fixed with an indefinite liability to account to the original and long gone tenants for the deposit sum, which was being held as security in respect of acts for which they are no longer responsible for, having moved out of the premises.

Conclusion

It was therefore found that as each incoming tenant repaid the deposit amount to the outgoing tenant, the landlord received that deposit in respect of each new tenancy, and as he failed to protect the deposit, the penalty arose. The Judge did however quantify the penalty payable at the lower end of what could be ordered, being equivalent only to the deposit sum. This was due to the features of the case, in particular, the informal way in which the replacement deposit funds were paid and that the deposit was taken at a time when the deposit protection rules did not apply. It was also relevant that the landlord had retained the deposit and was willing to protect it now.

Although the decision went against landlords in respect of the claim for failing to protect deposits, it should be a welcomed decision by landlords in general as the first instance finding regarding licensee status would have caused difficulties for landlords when seeking possession. Fortunately, the appeal has clarified this.

Positive news

  • Hubble space telescope's function is restored - The Hubble space telescope has been gathering data about the Universe for more than 30 years. On 13 June a glitch took the telescope offline, however engineers have now restored the telescope after switching over to backup hardware, meaning it can continue to run as one of the most important research tools in history once more.
  • Jeff Bezos launches to space - Billionaire and Amazon founder, Jeff Bezos has made a short journey to space. Accompanying him was Wally Funk, an 82 year old pioneer of the space race. Ms Funk is the oldest person to ever have been to space. Ms Funk was part of the Mercury 13 group, who in the 1960s were denied the opportunity to go to Space. Alongside the two was an 18 year old student, Oliver Daemen (the youngest person to go to space) and Jeff Bezos' brother.
  • The first baby beaver has been born on Exmoor for the first time in 400 years, footage capture by the National Park shows the beaver swimming with its mother. The two parent beavers were introduced by the National Trust in January 2020 to ease flooding and increase biodiversity. Since arriving on the National Trust's Holnicote Estate the beavers have transformed unmanaged woodland into a more open wetland which has served to benefit other wildlife on the estate.

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