The decision of the Scottish Lands Tribunal in EE Limited & Hutchison 3G UK Limited v Duncan & Others was the first to rule on the modification procedure under Part 5 of the new Electronic Communications Code.
Part 5 of the Code provides a mechanism for the parties to modify a "code agreement" at, or after, the expiry of the contractual term.
The Tribunal considered nine conjoined applications brought by the operators under paragraph 33 of the Code seeking the termination of leases, which had passed their contractual expiry dates, and their replacement with new agreements under the new Code.
Two key issues were determined by the Tribunal:-
Scottish leases continuing by tacit relocation are subsisting agreements
To be able to use the modification procedure, the operators had to show that the leases were "subsisting agreements" when the new Code came into effect in December 2017. As code agreements have to be in writing, the landowners argued that the leases, which were running on tacit relocation (extended on a yearly basis after the contractual term) at the relevant time, were not agreements in writing and were therefore not subsisting agreements under the Code.
The Tribunal confirmed that tacit relocation continues an existing agreement and does not create a new lease. For that reason, whilst the contractual terms had expired before the new Code came into effect, the leases were held to be subsisting agreements for the purposes of the Code and therefore the modification procedure was available to the operators.
This is in stark contrast to the "black hole" faced by the Upper Tribunal in England in Arqiva v AP Wireless where it was held that an operator holding over under a tenancy at will (essentially the English equivalent to tacit relocation) had no such protection. The Scottish Tribunal observed that the "black hole" does not materialise in Scotland. This dichotomy shows a divergence north and south of the border with operators in Scotland with leases that have passed their contractual expiry date still able to engage the Tribunal's powers to terminate and impose new agreements under Part 5 of the Code.
Modification must be justified
Having established their right to seek new agreements in place of the old, the operators ran into difficulties in justifying the imposition of the new agreements they sought.
The Tribunal decided it is not enough for operators to justify new agreements by reference to the general advantages of having new agreements under the new Code, which include enhanced rights to upgrade equipment and share use of sites. Operators must be able to show a particular need in relation to the particular site, for example, where there is a requirement to upgrade a site but the terms of the existing agreement do not allow that to happen. The operators in Duncan failed to provide sufficient justification for the replacement of the existing agreements and, on that basis, the applications were refused.
Implications for operators and landowners
Whilst operators in Scotland with leases running on tacit relocation when the new Code came into effect are in a stronger position than with equivalent sites in England and Wales, the Scottish Lands Tribunal has undoubtedly set the bar high for obtaining replacement agreements making it clear that the modifications sought must be justified.
An appeal of the Tribunal's decision is now under way in the Court of Session and the outcome of that will be eagerly awaited by both operators and landowners alike.
Changes to the modification procedure are also being considered as part of proposed reforms to the Code and featured in the UK government's recent consultation which closed in March (see our previous blog here).
