I know. I rise to move Amendment 17 in his name. I am grateful for the tuition that I have also had from the noble Earl, Lord Lytton—more about him shortly. Unfortunately, we are missing his huge expertise, but do not worry, I will be here to channel some of his thoughts.
This amendment seeks to ensure that any new agreements made with reference to Clause 57 and using paragraph 20 of the Electronic Communications Code must have regard to the terms of the existing agreement to ensure continuity and fairness. It aims to address outstanding concerns with the way rights are assigned when there are operators in occupation at a site. This is a complex issue and I am aware that the Minister and his colleagues at DCMS have been grappling with it as the Bill has been developed, but it is vital that the Government get this right.
The issue that the Government are trying to address was brought about by a confusion in the 2017 code. There have been some issues where operators have been prevented from getting the code rights they need
to support their networks because they are already in occupation of the land and they cannot grant themselves rights.
The Government’s original consultation response and the first draft of the Bill tried to address this by changing the definition of “occupier” in the Bill. This was at Clause 57 in the original Bill. The stated policy intent made it clear that the change is intended only to address the issue that we have outlined and to ensure that when operators are in occupation of land they are able to obtain new code rights.
However, it was made clear to the Minister and his colleagues at DCMS that the original draft would in fact have much greater implications and would potentially allow operators to misuse Clause 57 as it was originally set out to modify or cancel agreements mid-term. This would be in the operators’ interest, since they could break a contract that had been agreed in good faith and move the new contract on to a new valuation basis under the 2017 “no scheme” provisions for consideration.
The Government tried to address this by removing the original draft of Clause 57 and replacing it with the new Clause 57 that we have before us today. Instead of changing the definition of “occupier” in the Electronic Communications Code, it creates a more specific code right to deal with the underlying problem.
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However, despite this change, concerns remain that operators could still use the new Clause 57 in conjunction with paragraph 20 of the Electronic Communications Code to break existing contracts. Ministers tried to provide some reassurance that this is not the case in their presentation of the Government’s amendment in the House of Commons, but this simply does not create enough certainty within the industry, and it could cause unnecessary delays.
We know that this issue has been tested in the courts in the years that followed the 2017 reforms to the Electronic Communications Code. We have no reason to believe that the response from the industry will be any different this time, not least because there is so much commercially to play for—there is a lot of money on the table here. The best thing to do is to provide legal clarity.
This amendment is intended to remove the incentive for operators to use paragraph 20 of the Electronic Communications Code—the paragraph that details when a court can impose a code agreement—to break and reconstitute agreements on more favourable commercial terms where other methods are available to address pressing needs for narrow rights when in occupation under an existing contract. It would do this by ensuring that any court imposing a code agreement must have regard to the commercial terms of any existing agreement and to any other methods of statutory renewal available to the parties. I am aware that this is a complex problem, but it is one that we really have to get right. We would welcome the Minister’s urgent attention on this issue.
If noble Lords thought that got complicated, I am now going to channel the thoughts of the noble Earl, Lord Lytton. There is precedent for this: during the passage of the Commercial Rent (Coronavirus) Bill,
the noble Earl was struck down with coronavirus—as was almost everybody else—so the House was left with me and the Minister, and I had the pleasure of channelling the noble Earl’s thoughts. I know of no one in your Lordships’ House who understands the valuation issue better. Therefore, I am going to reproduce what he sent me, because I think it is important to put it on the record at this point.
The noble Earl said that one important factor behind this amendment is the long-standing principle that where a business lease is protected under statute by the Landlord and Tenant Act 1954, its renewal is to be on substantially the same terms and based on the same principles as the existing lease. This follows because the LTA—as I will now call it—provides that the old lease does not end but is statutorily continued. The entitlement of a tenant to apply to a court for a new lease is based on this principle.
The 1983 decision in O’May v City of London Real Property Co. Ltd set out the criteria, namely that while a court has discretion as to new lease terms, the starting point is always the existing lease terms. After all, this is a renewal of an existing deal, not a completely new one. So, the decision put the onus on the party proposing the change in lease terms to justify the change, and further, that the change should be fair and reasonable as between the parties, usually meaning that any change should not materially alter the character of the commercial arrangement. The court may reach its decision depending on whether detriment will be suffered by the non-proposing party that cannot be compensated in monetary terms within the parameters of the lease. Outside this—and the decision of a court in any given instance may be difficult to predict—changes made have been a matter of voluntary negotiation. This amendment seeks to restate this in the telecoms code environment.
A material departure from this principle, however, would risk mischief not just in the telecoms sector but—in the opinion of the noble Earl—in the wider world of commercial property. So, the Minister’s response may be a test of whether this Government believe in free market principles, which to a very large extent underpin the market in and provision of business space, commercial freedom to contract, flexibility, investment and innovation, and ultimately employment and productivity—not to mention entitlement to one’s property assets under convention rights. I think the noble Earl is raising the stakes on this issue.
In every other walk of life, commercial contracts freely entered into are not subject to unilateral redefinition of the lease terms, leaving aside for one moment the question of rent. The contract is a package of terms, in which rent is but one factor. What is the scope, in the Government’s view, of this contractual redefinition under the code, as reinforced by the Bill?
Governments can, of course, turn long-held understandings on their head, as the Labour Administration in 1963—I am sure none of the Front Bench remembers—did with the residential security of tenure of rent control.