12 Days of Christmas – Day 8

On Day 8, we look at the Upper Tribunal's decision in AP Wireless II (UK) Ltd v On Tower UK Ltd. Whether a telecommunications agreement is a lease or a licence has a significant impact on the rights of the parties. This case looks at the correct classification of two agreements, and in doing so contains a detailed discussion of the lease/licence distinction and relevant authorities.

The Background

The case concerned two agreements for the installation and operation of telecoms apparatus on greenfield sites. The first agreement was made in writing in 1997 between Orange and Mr Thornhill, it was signed by each party but not made by deed. The 1997 agreement had a minimum term of 10 years which thereafter continued subject to a right to terminate on not less than 12 months' notice. The second agreement was made in writing in 2002 between Orange and the Pinkertons. Again, the 2002 agreement was signed but not made by deed, and was granted for a fixed term of 20 years.

Whether the agreements were leases or licences was questioned, as this would affect the statutory procedures for renewal and termination. If held to be leases, any termination or renewal would be under the provisions of the Landlord and Tenant Act 1954. If held to be licences, any termination or renewal would be under the Electronic Communications Code, which is less favourable to the site provider.

The Decision

The judge restated the essential elements of a lease stated in Street v Mountford, being exclusive possession, for a term certain and the payment of rent. Any labels given to the agreement may be indicative but are not determinative, it is necessary to look at the whole agreement and analyse the substance and effects of the rights granted.

The judge analysed the site plans, the wording of grant clauses, access rights and termination provisions, ultimately determining that both agreements granted exclusive possession (overruling the contrary decision of the First-tier Tribunal on the point). The judge found no issue with the 20-year fixed term of the 2002 Agreement, finding that it constituted a valid lease. As for the 1997 Agreement, the judge ruled that the "minimum term" together with the annual break right did not constitute a term certain. Accordingly, the 1997 Agreement was found to be a licence.

This case reinforces the importance of looking at the substance of an agreement rather than the label. Even with exclusive possession, an agreement may not be a lease where the term is not sufficiently certain. The importance of term certainty cannot be overlooked.

If you have managed to read this far, here is your reward of a festive joke to get you in the Christmas spirit: What do you get if you cross a snowman with a shark? Frostbite!!