Break Stuff – The decision in On Tower UK Ltd v British Telecommunications plc [2025] and the impact in respect of break rights in Code Agreements

The fundamental provisions of the Electronic Communications Code (the “Code”) came into force following the passing of the Digital Economy Act 2017. The Code grants operators statutory rights to install, maintain and operate their electronic telecommunications apparatus over land subject to agreements with landowners or rights imposed by the court.

When an agreement would ordinarily end in accordance with its contractual terms (e.g. at term expiry or upon exercise of a break clause), paragraph 30 of the Code provides for statutory continuation of the agreement until it is terminated by the landowner or the operator in accordance with the Code. This is similar in effect to ‘holding over’ under the Landlord and Tenant Act 1954.

As such, for a break to be valid and effect termination, it must be served before or alongside a Code termination notice pursuant to paragraph 31 of the Code.

A paragraph 31 notice requires at least 18 months’ notice to be provided, which ends not earlier than the contractual expiry or break date, and must include one of the cited termination grounds prescribed by the Code, such as redevelopment.

Facts

In December 2021, BT (the landlord) granted On Tower (the tenant) a lease of part of a roof of a site until November 2030, with options to renew. The lease fell within the ambit of the Code and contained a landlord’s break clause.

On 3 October 2022, BT served a contractual break notice to end the lease on 8 November 2023 and a paragraph 31 notice (citing redevelopment as the termination ground) under the Code to end the Code agreement on 8 April 2024. On Tower opposed both notices and made a reference to the Upper Tribunal (“UT”) for an order to continue to exercise its Code rights on the same or modified terms.

In the original decision made at the UT, the tribunal held that a landowner could serve a paragraph 31 notice even if the contractual break had not been exercised, provided the break right was (in principle) available.

On Tower appealed the decision at the Court of Appeal (“CoA”).

Judgment

The CoA allowed the appeal, reversing the decision of the UT and providing useful confirmatory commentary on the application of the Code.

The CoA held that Code agreements continue by force of statute, as opposed to contract, so that the Code right continues to be exercisable by the operator and to bind the landowner. Such statutory continuation does not render a contractual break provision as having no legal effect; it merely acts as a ‘gloss’ and can only be removed with a valid paragraph 31 notice.

Consequently, the service of a valid break notice only ends the contractual agreement between the parties – the service of a paragraph 31 ends the statutory arrangement between the parties. As such, landowners must first end the contractual element of the agreement before the statutory element is terminated.

The CoA further confirmed that where an agreement contained a landowner break provision requiring service by notice relying on specified grounds and subject to conditions, nothing in the Code could override such terms. The Code does not trump existing contractual break terms unless such terms purport to modify/disapply the paragraph 31 process.

Finally, the CoA determined that where a landowner relies on a break clause as the ground for serving a paragraph 31 notice, it “must exercise its right to break the contractual term in compliance with the terms of that clause”. In this respect, it is not enough that the break could be used (as was the argument advanced by BT in the UT case) – the break had to be validly exercised if this was a requirement to terminate the agreement.

It is worthwhile noting that BT has now appealed the Court of Appeal’s decision to the Supreme Court.

Considerations for landowners

1. Terms – if you intend to break an agreement, treat every requirement in the clause as essential. Serve the break notice in the form and within the period specified, recognising that the termination provisions under the Code must be complied with in tandem with the contractual requirements. It may be that the contractual grounds for termination differ from the statutory grounds.
2. Timings – the CoA did not clarify whether a contractual break must be exercised and have expired before the paragraph 31 notice is served. There is nothing within the Code to suggest that a paragraph 31 notice cannot be served immediately after a break notice, assuming that the break expires before the paragraph 31 notice expires. Consider timings of service for both the contractual and statutory elements.
3. Project Requirements – where the break is tied to a specific ground, such as redevelopment, ensure there is sufficient evidence demonstrating the ground and ensure any conditions in respect of such ground will be satisfied by the timings outlined in the agreement. In the case of redevelopment, the intention to redevelop must be proven as at the date of the court hearing.
4. Challenge – service of a paragraph 31 notice is not the end of the line for the operator. Operators have the ability to counter paragraph 31 notices and ask the court for a new agreement under paragraph 34 of the Code.
   Removal – the break/paragraph 31 steps only ends the legal agreement; a landowner is still required to follow the steps at Part 6 of the Code to enforce removal of the apparatus on its land.