The recent decision of the Scottish Lands Tribunal in EE Limited/Hutchison 3G Limited (Applicants) v Duncan and Others (Respondents) LTS/ECC/2019/12 to 16 and 2020/01, 02, 03 & 13 issued on 23 September 2020 is the latest in a tapestry of litigation which has arisen since the coming into force of The Electronics Communications Code on 28 December 2017. Still commonly called the ‘new Code’ nearly three years after coming into force, there have been a number of uncertainties and unintended consequences on which the courts have been asked to arbitrate to the detriment of landowners and operators alike. Given that the new Code was aimed at providing certainty for parties to underpin an improvement and expansion to the country’s communication network, it has been an inauspicious start.
This was a highly anticipated decision on the relevancy of nine conjoined applications concerning modification of Code agreements under Paragraph 33, Part 5 of the ECC. Each application sought the termination of existing agreements under the former Code based on leases which had expired and were running on tacit relocation, in order to replace the agreements with ones under the new Code.
This is the first decision issued on Paragraph 33 applications. In addition to discussing the application of the modification procedure under that paragraph, it clarifies the interaction between Code rights and the doctrine of tacit relocation in Scottish leasing law. Paragraph 33 allows parties to modify the terms of existing agreements which have expired or are about to expire through several possible orders, however there must be an existing agreement in place in order to make a Paragraph 33 application.
By way of background, it should be noted that tacit relocation is a feature of Scottish leasing law, which will apply in situations where the contractual term of a lease comes to an end. Where neither party serves 40 clear days’ notice prior to the term expiry date, the lease will continue for a further year on the terms which then applied. This situation will apply from year to year unless either party gives notice to terminate. Different notice periods and rules apply to subjects over two acres, although the principles remain the same.
In the UK, this doctrine is unique to Scotland. Similar situations in England are governed either by the provisions of the Landlord and Tenant Act 1954 where the relevant lease has the protection of that statute, or by the status of a tenancy at will where there is no protection. Previous decisions of the Lands Tribunal in Ashloch and AP Wireless respectively provided clarity on the interaction of Code rights with that statute, and with tenancies at will. In the AP Wireless case, the operator’s occupation had the status of a tenancy at will following the expiry of its contractual agreement, which was excluded from the 1954 Act. This barred the operator from exercising Code rights under either paragraphs 20 or 33.
A tenancy at will is not a concept recognised in Scottish leasing law, and luckily for operators a parallel situation regarding tacit relocation has been avoided. The decision in EE Limited/Hutchison 3G has now confirmed that a lease which continues by virtue of tacit relocation is a subsisting agreement and does not constitute a new tenancy, as the written contract remains the same. Transitional Code rights will apply to agreements continuing on tacit relocation and there will be a prima facie right to seek modification under Paragraph 33, in contrast to the situation in England where an operator continues to occupy under a tenancy at will.
However, this decision is tempered by a further element which sets a high bar for operators to justify modification under Paragraph 33 and which may protect landowners’ interests under existing agreements. The lower rental values of the new Code had led many operators to look for ways to renew their existing agreements to benefit from these terms. However, the Tribunal clarified that modification procedure can only be used where there is a specific need for it. General policy considerations or commercial practicality will not clear this hurdle, as agreements must be unduly restrictive or onerous to merit such a need. Where modifications are not permitted under Paragraph 33 operators may now be required to renew existing agreements on less favourable terms, pending further decisions of the Lands Tribunal in connection with the operation of Paragraph 33.
It is therefore unlikely that we have seen the last of the current line of litigation on the operation of the new Code.
The full opinion of the Tribunal is available at http://www.lands-tribunal-scotland.org.uk/decisions/LTS.ECC.2019.12to16and2020.01to03and13.html