In Vodafone Ltd v Potting Shed Bar and Gardens Ltd (formerly known as Gencomp (No 7) Ltd) and AP Wireless II UK Ltd (2023), the Court of Appeal ruled that tenants under concurrent leases of properties which are subject to Code Agreements have the benefit and burden of those Code Agreements and, as such, are capable of terminating them in accordance with the provisions of the Code. This overturned a previous decision by the Upper Tribunal.
This ruling impacts tenants under “concurrent leases”, these are leases of a premises which are already the subject of another lease. The concurrent lease sits above the existing lease and the tenant of the concurrent lease will effectively become the landlord of the existing lease. Often, concurrent leases are granted for development purposes.
In this case AP Wireless were the tenant of a concurrent lease and wished to issue a notice to terminate a telecommunications lease granted to Vodafone which sat underneath their concurrent lease. The Upper Tribunal found that they had no standing to serve such a notice as they were not a successor in title to the freeholder of the site. Paragraph 10(3) of the Code considers who is party to a Code Agreement (and so the party with the benefit and burden of the Agreement), it states that “a successor in title who is bound by a code right….is to be treated as a party to the agreement….”. This would not include the tenant of a concurrent lease entered into after the relevant Code Agreement as they are not a successor in title to the party who granted the Code Agreement.
The Court of Appeal held that this did not reflect the intention of the Code as a whole, and that the owner of a concurrent lease should receive both the benefit and the burden of a Code Agreement, therefore allowing them to serve a notice to terminate under the Code. This is despite the provisions of paragraph 10(3) of the Code, which the Court of Appeal considered was not intended to be an exhaustive list.
This judgment will give comfort to tenants of concurrent leases, particularly where they are granted for development purposes requiring vacant possession, that they do have standing to issue notices terminating Code Agreements. It remains to be seen whether the operator will appeal.
Jonathan Cope