Telecom rent valuation: Landlord & Tenant Act 1954 v the Code

The appointment of a single joint expert (SJE) is usually made for reasons of expediency and cost saving. That was not the result in the unreported case of Vodafone Enterprise UK v Portsmouth Water Limited (1) and AP Wireless 2 UK Limited (2). When a Judge describes the procedural history of a case as "extremely depressing", you can be forgiven for not expecting a happy ending.

Expert valuation instruction

The SJE was tasked to determine the rent payable for a telecommunications mast and the parties were to agree a joint letter of instruction. The letter confirmed that the rent was to be assessed on the basis of a lease granted under sections 24 and 34 of the Landlord & Tenant Act 1954 ("1954 Act").

Unsurprisingly, the claimant operator, Vodafone had a very different take on what this meant when compared to the original landowner (Portsmouth Water) and current site lessee (AP Wireless). Vodafone argued that the lease renewal should be in accordance with the new Electronic Communications Code ("Code"), whereas AP Wireless maintained that the 1954 Act was the relevant statutory authority.

Legal guidance

The SJE sought guidance from the parties. The Judge observed that this was an issue that was capable of being resolved simply and straightforwardly, in a cost proportionate manner. The legal representatives should have discussed the matter and then informed the SJE accordingly.  This did not happen.

Vodafone's solicitors responded to the SJE without consulting with the defendant's solicitors, which the Judge regarded as surprising. However, CPR 35.8 (2) confirms that a party may instruct a SJE unilaterally, but those instructions must be copied to the other parties involved.

Vodafone's response was that "the figure should be based on new Code consideration as that is the Section 34 rent that should be set." It should be appreciated that these letters were written before the Upper Tribunal handed down its decision in CTIL v Ashloch Limited (1) and AP Wireless II (UK) Limited (2) ("Ashloch Case") on 8 November 2019.

Ashloch case

The Ashloch case confirmed that where an operator is occupying a site under the terms of a 1954 Act lease that is in force when the Code commenced, then any renewal of such lease must be in accordance with the 1954 Act and not the Code.

It should be noted that the Ashloch decision is subject to appeal. The Upper Tribunal refused the application, but the Court of Appeal has granted permission to appeal, with the hearing to take place by April 2021.

However, Vodafone continued to try and hunt with the hare and the hounds, after the Ashloch decision, by maintaining that although the valuation should be a 1954 Act one, the SJE should take account of the Code. The Judge did not like this "tale of obfuscation and shifting sands" and determined that the SJE had asked a simple question as to which statute should govern the valuation.

Criticism of Vodafone

The criticism levelled at Vodafone is that there should have been an unequivocal acceptance of the application of the 1954 Act to the valuation, albeit that Code comparables would be relevant, but considered alongside non Code comparables. The SJE would consider the evidence provided and make the appropriate adjustments to such comparables, in the usual manner.

It was Vodafone's failure to distinguish between valuation methodology and where comparable evidence might be sought, which set the hare running in this case. Vodafone's solicitors stated in open correspondence that the valuation must be based on the Code, which was plainly wrong. The defendant's solicitors distinguished the statutory legal basis of valuation and adjusted Code comparables, but their correct analysis was rejected by Vodafone and a hearing was required.

Hearing outcome

The hearing was to determine the second defendant's application that the SJE proceed with a 1954 Act valuation. Vodafone argued that there was no need for an order from the Court, because the jointly agreed instructions already instruct the SJE to value in accordance with the 1954 Act.

The Judge did not accept this and granted the second defendant's application. The confusion had been caused by Vodafone and their failure to clearly state that the valuation methodology was that of the 1954 Act, but Code comparables would be relevant.

Definitive judicial guidance as to how Code rents should be assessed is still awaited and the substantive hearing in this case is due to take place later this year.