Scottish Lands Tribunal ruling strengthens the position of landowners when negotiating mast leases
Harper Macleod Partner Carolyn Morgan represented one of the successful defenders in EE Limited and Hutchison 3G Limited v Duncan and Others. The Scottish Lands Tribunal decision in this case offers some protection for landowners facing demands from telecom operators to renegotiate lease terms for masts on their land.
The applicants in this case were telecom operators who occupied nine separate mast sites under Scottish lease agreements, each of which had renewed automatically by tacit relocation. The operators sought to terminate those lease agreements and enter into new leases on more favourable terms, relying on paragraphs 33 and 34 of the Electronic Communications Code (the new Code) which is set out in Schedule 3A to the Communications Act 2003 as amended by the Digital Economy Act 2017.
The new Code is widely regarded as more operator friendly than its predecessor under the Telecommunications Act 1984. Rental values under the new code are typically lower and new Code agreements carry more extensive statutory rights and protections such as wider sharing and alienation provisions. Paragraph 33(5) of the new Code allows parties to alter or modify existing agreements that have either expired or are about to expire.
The applications in this case were the first under paragraphs 33 and 34 of the new Code to be considered by a court in the UK. They raised novel and complex questions and the outcome will be of interest to all operators, landowners and of public interest.
Tacit relocation in Scots law
In Scotland, if a lease is not terminated at its original expiry date then it will continue on the same terms as the original agreement on a year-to-year basis. This is called tacit relocation. The lease will continue to run in this way until parties agree otherwise.
The position in England and Wales is different as the Landlord and Tenant Act 1954 governs the termination and renewal of lease agreements.
The Tribunal required to determine whether a Scots law lease operating under tacit relocation at the time that the new Code was introduced qualifies as a ‘subsisting agreement’ under the new Code. The Tribunal confirmed that it does. The Tribunal was satisfied that tacit relocation extends the original (often expired) agreement on the same terms and does not create a new tenancy on a yearly basis. The original agreements entered into before the introduction of the new Code therefore have not expired and continue to be valid subsisting agreements.
The Tribunal went on to find that in order to make a change to these valid subsisting agreements, the operator would have to prove that there was a specific need to do so. The Tribunal observed that, given a choice, operators would always opt for a new Code agreement over an old Code one but it was not Parliament’s intention to give operators complete control over this where there was already a valid agreement in place.
The applicants in this case only said that they have a business need to be able to take advantage of the new Code. The Tribunal held that this was not sufficient justification for creating new agreements in these nine cases as no specific need had been proved in relation to any particular site. For example, the operators did not show that the current agreement was preventing new apparatus being installed at a site, or that they wished to assign a particular agreement and were prohibited from doing so. The Tribunal held that to be successful in any such application, the operators would need to give more detail about the way the particular agreement is unduly onerous or restrictive. All nine applications considered in this case were dismissed.
What does this decision mean for telecom operators and landowners?
For operators, it has been confirmed that leases operating under tacit relocation in Scotland have the protections offered by the Code. However, if they wish to renegotiate the terms of those leases then they will need to demonstrate that there is a specific need to do so. This means operators will need to take a site specific approach to lease amendments, demonstrating the basis for requiring an amendment in each case.
For landowners, this decision offers greater security and protection from operators seeking to terminate leases and impose new terms under the Code without proving a specific need to do so.
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The law relating to mast sites in Scotland can be complex and specialist legal advice is recommended.
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