EE & Anor v AP Wireless II (UK) Ltd

Factual and Procedural Background

This reference concerns the renewal under Part 5 of the Electronic Communications Code of the lease of a greenfield telecommunications site at Vache Farm near Chalfont St Giles in Buckinghamshire ("the Site"). The previous lease was granted in 2005 for 15 years and assigned to the Claimants in 2015. In 2018, the Respondent acquired an overriding 50-year lease and became the immediate landlord. The rights under the previous lease continued under the Code after expiry in May 2020.

The Claimants sought new code rights in December 2020, but the reference was stayed pending appeals in other cases. The principle that a new lease should be granted is no longer disputed, and most terms have been agreed. The new lease is for ten years with a break exercisable by the operator after five years and a rent review by RPI after five years. The remaining disputes concern the rent amount and whether the Respondent should have a break clause for redevelopment.

The Site is rural, located within green belt and an Area of Outstanding Natural Beauty, comprising a fenced 96 m² compound with a 20 m lattice steel mast and equipment cabins. Access issues exist due to changes in the private road and gates. The Site is used by multiple telecommunications operators.

Legal Issues Presented

1. What is the appropriate rent or consideration payable under paragraph 24 of the Electronic Communications Code for the renewal lease of the Site?
2. Whether the Respondent (landlord) should have a right to terminate the new lease for redevelopment, and if so, on what terms and conditions?
3. Whether the break clause should be exercisable for redevelopment related to telecommunications use or more broadly.
4. The proper construction and scope of the landlord’s break clause, including the timing and evidential requirements for exercising it.
5. Whether an indemnity clause requiring operator reimbursement of sums potentially payable under the superior lease should be included.

Arguments of the Parties

Claimants' Arguments

• The break clause should be limited to redevelopment that excludes telecommunications-related development to avoid "blue on blue" disputes and maintain stability for network rollout.
• The operators require a minimum term to justify investment and do not wish to convert from Code rights to unregulated mast occupancy.
• The indemnity clause proposed by the Respondent is unclear, unnecessary, and overlaps with existing indemnities.
• The appropriate rent should follow the Tribunal’s established figure for unexceptional rural sites updated for inflation, approximately £1,000 per annum.

Respondent's Arguments

• The break clause should allow termination whenever the landlord desires to redevelop the Site or neighbouring land or if the paragraph 21 test under the Code is no longer met.
• Redevelopment includes replacing the operator’s mast with one owned by the landlord or an associated company, consistent with their business model.
• There is no policy reason under the Code to prohibit redevelopment involving telecommunications infrastructure.
• The rent should be higher than the established £750 figure (updated to £1,000) to reflect market evidence from non-telecommunications small rural site lettings and the burdens imposed by the lease.
• The Tribunal should revisit and increase the rent figure in light of new transactional evidence and expert valuation.

Table of Precedents Cited

Court's Reasoning and Analysis

The Tribunal first addressed the redevelopment break clause. It acknowledged the Respondent’s right to terminate the lease for redevelopment, consistent with Code policy and previous decisions. The Tribunal balanced the operator’s need for security with the landlord’s right to redevelop, concluding that termination should not be permitted before the fifth anniversary of the lease term and must be exercisable by giving at least 18 months’ notice expiring on that or any subsequent anniversary. The Tribunal rejected the Respondent’s broader proposed break clause based on the paragraph 21 test due to lack of evidence and potential for unnecessary disputes.

Regarding the construction of the break clause, the Tribunal favored language requiring the landlord to demonstrate a settled intention to redevelop that could not reasonably be undertaken while the lease continues, aligning contractual wording with the statutory test.

The Tribunal also declined to include the obscure indemnity clause proposed by the Respondent, finding it unclear and unnecessary given existing indemnities.

On rent valuation, the Tribunal reviewed the established three-stage approach under paragraph 24 of the Code, involving existing use value, benefits to the tenant, and burdens on the landlord. It noted the "no-network" assumption excludes value derived from telecommunications use.

The Tribunal considered expert evidence from both parties. The Claimants’ expert supported updating the Tribunal’s previous figure of £750 per annum for unexceptional rural sites to £1,000 to reflect inflation. The Respondent’s expert argued for a significantly higher figure (£2,850) based on market evidence of non-telecommunications small rural site lettings and adjustments for burdens imposed by the lease.

The Tribunal critically assessed the Respondent’s evidence, finding some of the short-term lettings and transition payment analyses unsuitable for a 10-year lease valuation and rejecting the Respondent’s critique of previous Tribunal decisions as inconsistent with the no-network assumption.

The Tribunal accepted that non-telecommunications small site lettings could provide useful comparative evidence, provided adjustments were made to exclude special value attributable to specific uses. It acknowledged that the Site had no alternative use value and that landlords require compensation for burdens and loss of control arising from the lease.

Balancing the evidence, the Tribunal found the previous figure of £750 (updated to £1,000) too low. Considering the evidence and adjustments, it concluded that the appropriate annual rent for the Site under the new lease is £1,750.

Holding and Implications

The Tribunal granted the renewal lease on terms including:

• A landlord’s break clause exercisable on or after the fifth anniversary of the lease term with 18 months’ notice, requiring a genuine settled intention to redevelop the Site that cannot reasonably be undertaken while the lease continues.
• The omission of the Respondent’s proposed break clause based on the paragraph 21 test of the Code, due to lack of evidence and potential for unnecessary disputes.
• The exclusion of the proposed indemnity clause requiring operator reimbursement under the superior lease, due to lack of clarity and overlap with existing indemnities.
• The rent payable under the new lease fixed at £1,750 per annum, reflecting inflation and transactional evidence of non-telecommunications small rural site lettings adjusted for burdens and the no-network assumption.

Implications: This decision refines the approach to redevelopment break clauses under the Electronic Communications Code, confirming that such clauses should balance operator security with landlord redevelopment rights and be exercisable only after a reasonable period with demonstrable intent. It also revisits and updates the benchmark rent for unexceptional rural telecommunications sites, incorporating relevant market evidence beyond previous Tribunal decisions. No new legal precedent was established beyond clarification and application of existing principles.