Determining the legal status of an agreement which forms the basis by which an operator occupies its telecommunications site has been a hot topic between operators and site providers for several years.
When the Electronic Communications Code as set out in Schedule 3A of the Communications Act 2003 (as amended) (the "Code") came into force in 2017, it granted operators more favourable rights of renewal than previous legislation.
The Code established that the procedure by which an operator may renew its occupation of a site would depend on whether the agreement for occupation was: a) lease; and b) could be renewed under the Landlord and Tenant Act 1954 ("LTA 1954").
LTA 1954 essentially gives a tenant the statutory right to seek a renewal of its lease under the same terms as its current lease, save for rent. This is usually viewed as a desirable right for a commercial tenant, but for telecoms operators, if they are in occupation under a lease which is protected by the LTA 1954, it means they are not automatically entitled to the more favourable Code rights when seeking to renew their agreement for occupation of the site. It also means site providers may be able to command a higher market rent.
Naturally, how to classify these agreements is a key concern for both operators and site owners, particularly when renewal rights and valuation mechanisms under the Code are at stake.
In APW v On Tower [2025] EWCA Civ 971, the Court of Appeal revisited the question of whether a telecoms site agreement constituted a lease or a licence. The agreement in question granted On Tower exclusive possession of a site for a minimum term of 10 years, followed by a rolling termination right.
APW argued this was a protected lease, entitling the operator to renewal rights under the LTA 1954. Further arguing that if the agreement did not operate as a lease then the court should infer that the parties intended to enter into a periodic tenancy.
The operator held a contrary view and argued the arrangement conferred no more than a licence to occupy, which would exclude those rights and potentially allow for a Code-based renewal.
The Court looked closely at the definition of the term within the agreement which was expressed as follows:
This Agreement shall come into effect on the date shown above and shall continue for no less than the Minimum Term [10 years from 11 March 1997]. It may be terminated by either party giving to the other not less than 12 months’ notice in writing to expire at any time on or after the expiry of the Minimum Term.
On a strict interpretation of the term the Court of Appeal supported the finding of the earlier court that the agreement was not a lease due to the uncertainty of term at the time the agreement was entered into. The court found that the agreement purported to create a minimum term of 10 years that could be determined on any day on or after its anniversary on 12 months’ notice given by either party.
This meant that the length of the tenancy purportedly created could not be determined when the agreement was entered into and was, therefore, uncertain and invalid. It could end on any day chosen by one of the parties on or after 11 March 1997 and was capable of lasting forever afterwards.
Despite the grant of exclusive possession, the lack of a fixed term meant the agreement failed the test for a lease under traditional property law principles. As the agreement could not be a lease the Court of Appeal considered the terms of it and held that the "best fit" for what the parties actually intended was that of a contractual licence and further declined to find that a periodic tenancy arose. This was because the agreement did not operate like a periodic tenancy e.g. continuing on a periodic basis.
The Court reaffirmed that whilst they do not generally like the rule, until the law in this area is changed, certainty of term is essential for the creation of a lease. Exclusive possession alone does not convert a licence into a lease.
