The difference between a lease and a licence is not always clear, and is decided on a case by case basis. As with any occupational agreement, an analysis of all relevant factors in their totality is required, when trying to categorise a particular agreement.
The below article sheds light on the factors that may differentiate the two types of telecoms agreements.
Wolf Bite – the key takeaways
• Operators with ‘leases’ which are protected by the Landlord and Tenant Act 1954 cannot use Part 5 of the New Code to renew those agreements. Operators who are occupying pursuant to ‘licences’ may do so, however.
• Landowners/ site providers should carefully consider any notices from operators seeking to renew their occupation agreement. An incorrect analysis of the type of agreement the operator has, could afford site providers extended periods of time on higher old code rents, and slightly better terms under the LTA 1954 renewal process.
• While there is no one succinct definition of a lease, or a licence in a telecoms context, a recent First-Tier Tribunal judgment, which determined the status of two existing telecommunications agreements, provides useful guidance on determining the difference.
• The Tribunal found that one agreement was a lease. The Operator had exclusive possession of a defined demise, for a term, at a rent – it had installed substantial telecommunications equipment, which was enclosed by fencing, which it solely occupied and owned. There were significant restrictions on the site provider’s ability to access the site and the operator had the option to share its ‘extensive’ rights over the site with others; a luxury not enjoyed by the site provider.
• The Tribunal concluded the second agreement could not be a lease, as it did not have a ‘term certain’ (see below) and was not a ‘periodic tenancy’ either. The agreement provided for a minimum term, with a right to terminate thereafter upon giving 12 months’ written notice.
In a telecoms agreement, what is the difference between a lease and a licence?
The ‘legal species’ of an existing telecommunications agreement[1] will determine whether a tenant may serve notice under Part 5 of the New Code to renew their rights.
If an existing agreement is a lease with protection under the Landlord and Tenant Act 1954 (the LTA 1954), the correct renewal procedure is in Part 2 of the LTA 1954 and not the New Code. The First Tier Tribunal does not have jurisdiction to deal with the former, which is the remit of the County Courts.[2]
However, if the agreement is truly a ‘licence,’ a tenant operator may utilise Part 5 of the New Code and serve a Paragraph 33 notice calling for renewal, accessing the various rights and concessions which the New Code has introduced.
The ‘lease or licence’ distinction is not new to property law and is often key to determining the extent of a party’s rights under it, and how/if an agreement can be renewed or terminated. There are general legal principles which apply to help establish whether an agreement is a lease or a licence.
Guidance from AP Wireless II (UK) Limited v On Tower UK Limited [2024] UKUT 263 (LC)
In a 75-page long judgment, Mr Justice Edwin Johnson has provided guidance on the factors to be considered in a telecoms context. In that case, the Tribunal was tasked with deciding the legal status of two occupational agreements dated 1997 and 2002 respectively, which were held by Orange Personal Communications Services Limited (“the operator”).
The Judgment reiterated and applied the following principles:
• Whole agreement: when construing the agreement(s) it is necessary to look at the whole agreement and analyse the substance and effect of the rights and obligations under it. This is an objective analysis. If there is ambiguity, the court is entitled to prefer the interpretation which is consistent with ‘business common sense.’
• Exclusive possession: the appropriate starting point remains Street v Mountford [1985] AC 809 which states if a party has exclusive possession of the property for a term and at a rent, this is indicative of a lease.
• The fact a telecommunications agreement grants an operator permission to install equipment on land does not necessarily equate to a grant of exclusive possession; it will depend on the relevant circumstances, including the nature of the equipment involved.
• The operator had exclusive possession of the sites in this case: the operator had been granted two ‘extensive’ bundles of rights in respect of defined areas of land. The sites were occupied solely by the operator’s telecommunications equipment, which belonged to it. One of the sites was further enclosed by fencing.
• Site sharing: a unique facet of telecommunications law and the New Code is the operator’s ability to site share. The right to share the rights with other operators, if not shared by the site provider, was held to be further indicative of exclusive possession and of the agreements being leases.
• Restrictions on access: the site provider had severely restricted access to the site (e.g. “reasonable access” by prior appointment) which was held to point in favour of their being leases.
• Rights of relocation: often telecommunications agreements will contain qualified ‘life and shift’ provisions or clauses obligating a site provider to consider an alternative site in the event they require the land back for other purposes. The Tribunal held such a provision was not inconsistent with the agreements being leases. However, the judgment tacitly suggests that if there was a more general right to require relocation, this may be more indicative of a licence.
• References to ‘successors in title:’ it was submitted that the fact the agreements referred to ‘successors in title’ suggested they were leases because licences – being ‘personal’ contracts – cannot be succeeded to as there is no legal title created. Equally, the burden of a licence contract is not capable of assignment in law. The Judge agreed that these references ‘pointed strongly’ to the agreements being leases and not licences.
• Absence of Deeds: pursuant to 52(1) of the Law of Property Act to take effect as a lease at law, an agreement for more than a 3-year term must be made by deed. In the present case neither agreement was, however, whilst the Judge found this could be ‘indicative’ of the agreements not being leases, this did not prevent them from being.
• Term certain: the Judge considered both agreements up to this point and that the above factors were indicative of both agreements being leases. However, whilst the 2002 agreement was for a certain term of years, by contrast, the 1997 agreement was for a “minimum term” capable of termination thereafter on 12 months written notice. It was argued that this did not satisfy the ‘term certain’ condition to be a lease and the Judge found this analysis to be correct, rendering that agreement a licence.
• Neutral factors: the Judge also noted some ‘neutral’ factors which were not indicative either way. These included the absence of reference to 1954 Act; the absence of any clause providing for the tenant’s quiet enjoyment of the site; the existence of provisions relating to upkeep of the telecoms equipment; the Site providers warranties as to title; the tenant operators obligation to maintain public liability insurance and the tenant’s obligation to pay rates.
What should landowners do if they receive a notice seeking renewal from a telecoms operator?
The correct legal interpretation of an existing telecommunications agreement is critical to understanding how a site provider or telecommunications operator may renew their occupational agreement. If a site provider receives notices from an operator seeking to renew their agreement, specialist legal advice should be sought to determine whether such notices are valid.
The decision of Mr Justice Johnson is an essential ‘go to’ for all those tasked with answering this important question, whilst remembering that each case is to be decided on its own unique set of facts.
Speak to a solicitor
If you are a landowner/site provider, and have received notice from a telecoms operator stating they wish to renew their agreement, please speak to our specialist telecoms litigation team, which has vast experience in this complex area of property law.
Contact us at hello@hagenwolf.co.uk, or on 0330 320 1440.
Footnotes:
[1] Meaning an agreement which was in place prior to the introduction of the Electronic Communications Code on 28 December 2017.
[2] At the time of writing, this appears to include implied periodic tenancies, despite the fact a tenant operator cannot serve a request under section 26 of that Act in such circumstances as there is no ‘term certain’.
