Renewal options for operators are narrower than you might think
In the latest case to come out of the Upper Tribunal on the Code – CTIL v Ashloch Limited and AP Wireless II (UK) Limited – it was held that, where an operator is in situ under an ‘old Code’ agreement which is being continued under the Landlord and Tenant Act 1954 (LTA 1954), that operator should apply for a new tenancy under the LTA 1954.
This is a decision which may surprise many. CTIL when bringing the case had contended that it should be able to apply to the tribunal seeking an agreement under Part 4 of the Code. Part 4 of the Code deals with the power of the court to impose an agreement for new code rights.
There are two distinct reasons why the tribunal found that CTIL could not obtain a new agreement via the Part 4 route:
(1) It had a subsisting agreement which was being continued under the LTA 1954
(2) It was an operator in situ (i.e. it was already in occupation of the site)
According to the tribunal, the fact that prior to the enactment of the new Code CTIL had entered into a lease with security of tenure under the LTA 1954 put it at odds with the principal that an operator should not obtain the benefits of the new Code retrospectively. If an operator is in occupation under a tenancy to which the LTA 1954 applies, then it will not escape the restrictions of that Act.
The second point relates solely to the Code, and specifically the requirement arising from CTIL v Compton Beauchamp that an agreement under Part 4 may only be imposed on the person in physical occupation of the land. CTIL was in situ and therefore it was the occupier as well as being an operator. The tribunal found that the correct route for renewal in the case of an operator in situ was under Part 5 of the Code (which deals with termination and modification of agreements). Whereas the operator also being the occupier was an issue for the purposes of Part 4, the tribunal explicitly pointed out that this is not a problem when determining an application under Part 5. Rights may be imposed on the “site provider”, and this need not be a person in physical occupation of the land.
In this instance though CTIL was prevented from applying under Part 5 of the Code because it had a subsisting agreement to which Part 2 of the LTA 1954 applied. As a consequence the only option open to CTIL to renew its lease was via the LTA 1954 route.
The tribunal did also consider what would happen after that. A renewal lease granted to CTIL now would have the primary purpose of granting code rights and would be granted after the Code took effect, making it outside of the scope of Part 2 of the LTA 1954. This new agreement could therefore be renewed in the future under Part 5 of the Code.
"This was a complex case for the tribunal to consider, and there are a lot of separate issues that come into play."
Where an operator has an ‘old Code’ agreement which is continuing under the LTA 1954, it may apply for a new tenancy under the LTA 1954, but it may not apply to the Upper Tribunal for rights under the Code.
Where an operator is in situ under any agreement, it is classed as both operator and occupier, and is therefore precluded from applying for code rights under Part 4 of the Code. The only route available under the Code for it to seek a new agreement would be via Part 5.
The decision of the tribunal is likely to prove controversial among operators, and is likely to be appealed. It also provokes certain questions, in particular as to how the rent payable under a new LTA 1954 tenancy would be assessed. Would an open market rent determined by the County Court take into account the no-network assumption that is applied to rents under the Code?
For more information on this, please contact Graham Jones, or you can give us a call on 0345 070 6000.