Telecommunications lease renewals under the Landlord and Tenant Act 1954: calculating the rent payable

In the case of (1) EE Limited and Hutchison 3G UK Limited v (2) Richard Morriss, EE Limited and Hutchison 3G UK Limited (the “Claimants”) held a lease of part of a private estate in the Ashdown Forest. The Claimant’s lease expired on 1 August 2014, following which the Claimants held over under the Landlord and Tenant Act 1954 (the “1954 Act”). Such tenancies are renewed under the 1954 Act and are then subject to the statutory regime set out in the Communications Act 2003.

Amongst several other issues before the court, the method of calculating the rent payable for the renewal lease under the 1954 Act was examined.

Analysis: calculating the rent payable

When determining the rent payable under a telecommunications renewal lease, the Court will include in its calculation any early completion payments made by the operator to the site provider.

Current market practice is for capital payments to be paid around the time of the commencement of the lease. In the case of EE Limited v Morriss, the valuer for the Claimants excluded the capital payment paid to the site provider when calculating the new rent, on the basis that it would be an incentive which would not have been paid by a willing landlord. Martin Rodger QC, sitting as a Judge in the County Court, determined that these “early completion payments” should be factored into the new rent calculation.

The decision was made on the basis that the Court had reviewed previous cases in which these payments were being made, even where completion of the lease was late. To determine the new rent payable a straight-line apportionment of the capital payment is made, spreading the capital payment over the term of the lease.

This case also provides an alternative to the ‘Hanover’ method of determining the rent payable for telecommunications sites. Martin Rodger commented that the structured valuation approach in Hanover “is only necessary where reliable transactional evidence is missing”. Here the rent payable for the site was assessed by reference to available market evidence.

Practical implication

Regardless of the label given to capital payments, these must be included as an annual equivalent when calculating the new rent payable under renewal leases of telecommunications sites. Further, market evidence can be used to assess the rent payable for a telecoms site renewed under the 1954 Act.

Co-authored by Alex Reading.

EE Ltd & Anor v Morriss & Ors: click here for the judgment.