On Tower UK Limited v British Telecommunications PLC

This Court of Appeal decision is about ending a telecoms site agreement where the Electronic Communications Code applies. The dispute was not just about the Code. It was also about whether the landlord had used the lease’s break clause properly.

The court held that paragraph 31 is not a shortcut around the contract. If a site provider wants to rely on a break clause to support a paragraph 31 termination notice, it must have an exercisable contractual right and must exercise that right in line with the agreement. The court also held that BT had relied on the wrong contractual ground, so its break notice failed and its paragraph 31 notice failed as well.

BT owned the freehold of a telephone exchange in Harrow. On Tower had telecoms apparatus on part of the roof under a lease granted in December 2021. That lease was treated as a code agreement under the Electronic Communications Code.

BT also had a wider property structure in place. It had granted a long lease of exchanges to Autumnwindow Limited and taken a lease back. BT could surrender exchanges when no longer needed, but only with vacant possession and free of telecommunications equipment. That wider arrangement mattered because it explained why BT wanted the On Tower lease to end.

The lease contained a detailed landlord break clause. It did not give BT one simple right to terminate whenever it wished. Instead, clause 5.8 set out five different reasons. Some of those reasons came with conditions and protections for the operator.

On 3 October 2022 BT served two notices. First, it served a contractual break notice under clause 5.8, saying the lease would end on 8 November 2023. Second, it served a paragraph 31 notice under the Code proposing that the code agreement should end on 8 April 2024 on the redevelopment ground.

On Tower resisted. It served a counter-notice saying it did not want the agreement to end, or alternatively wanted continuation on new terms. It then applied to the Upper Tribunal for continuation or modification of its rights.

The Upper Tribunal decided three preliminary issues. It held that the lease was a code agreement, that BT’s paragraph 31 notice was valid even without a separate valid break notice, and that BT’s contractual break notice was valid too. On Tower appealed on the break notice and paragraph 31 issues.

The main legal issue was the relationship between paragraph 30 and paragraph 31 of the Code and the parties’ lease. Paragraph 30 deals with continuation of code rights after the point when, under the agreement, they would otherwise stop being exercisable or the site provider could bring the agreement to an end. Paragraph 31 sets out the procedure for a site provider to bring a code agreement to an end.

The key question was whether BT could serve a paragraph 31 notice merely because a contractual break clause was available, or whether BT first had to validly exercise that break clause under the lease. The appeal also raised an earlier question: on the facts and the wording of clause 5.8, did BT actually have an exercisable contractual termination right at all?

A linked issue was whether BT could rely on the catch-all ground in clause 5.8(b)(v) when its real objective was to recover the site so it could surrender or dispose of its interest in the exchange. That mattered because the lease had a specific disposal ground in clause 5.8(b)(i), and the lease attached protections to some of the specific grounds.

The Court of Appeal upheld On Tower’s appeal on grounds 1 and 3. It rejected the Upper Tribunal’s view that a paragraph 31 notice could be valid without a separate valid break notice where the landlord was relying on a contractual break clause.

The court said the Code does not substitute its own termination machinery for the contractual mechanism while the agreement is still continuing by force of contract. Paragraph 30 continuation begins when the contractual agreement comes to an end in accordance with its own terms. Because of that, a site provider relying on a break clause to found an entitlement to serve a paragraph 31 notice must exercise that break right in compliance with the clause and the agreement.

The court was clear that this includes compliance with the requirements for exercising the break clause. Where a break clause may only be exercised on a particular ground or grounds, the reason needs to be stated so the operator can investigate and assess its position under the agreement.

The court then turned to BT’s contractual notice. It accepted the Tribunal’s finding that BT’s real reason for wanting to terminate the lease was to surrender its interest in the Kenton Road exchange to Autumnwindow Limited. That meant the relevant contractual route was the disposal ground in clause 5.8(b)(i), not the catch-all ground in clause 5.8(b)(v).

The court held that clause 5.8(b)(v) could not be read as a fallback whenever BT could not satisfy one of the earlier grounds. If it could, the detailed structure of clause 5.8(b)(i) to (iv) and the protections in clause 5.8(c) could always be bypassed. The court said that would be absurd.

Because BT’s reason was disposal of its interest, clause 5.8(b)(i) was the relevant termination right. But that right was not exercisable so as to bring the lease to an end by the expiry of BT’s paragraph 31 notice. Within that timescale there was no surrender of, or agreement to surrender, BT’s interest in the site. BT had therefore not shown an exercisable contractual termination right on the facts.

That meant BT’s contractual break notice was invalid. It also meant the paragraph 31 notice was invalid. The court added that even on BT’s own interpretation of the Code, the paragraph 31 notice would still have failed because the relevant termination rights under clause 5.8(b)(i) and (v) were not exercisable in the circumstances, and BT had not claimed that the alteration ground in clause 5.8(b)(ii) was exercisable.

If you own a building with telecoms apparatus on the roof, in a cabinet area or elsewhere on site, this case is a warning against treating the Code as if it overrides the contract from day one. The Code gives operators strong continuation rights, but the agreed contractual route still matters when deciding whether the landlord can get to the paragraph 31 stage.

For site providers, the first question is not simply whether you want the site back. It is why you want it back. Is the real reason disposal, surrender, redevelopment, alteration, compliance works, estate rationalisation or something else? The answer may determine which break ground applies and whether conditions or operator protections must be respected.

For operators, this case confirms that the wording of the lease can still be a strong line of defence. If the landlord’s notice relies on a broad catch-all clause but the real objective falls within a more specific ground, that may be challengeable. The same applies if the landlord has not actually exercised the contractual break right it says supports the paragraph 31 notice.

The decision should be read carefully and in context. It is especially useful for telecoms sites and code agreements. It should not be treated as a general rule for every commercial lease outside the Code regime.

The outcome turned heavily on the wording of clause 5.8 and on BT’s actual objective. The court treated the break clause as a structured set of termination rights, not as a menu from which BT could freely choose the easiest option.

Several features of the lease were important. Clause 5.8(b)(i) dealt specifically with disposal of BT’s interest. Clause 5.8(b)(ii) dealt with alteration. Clause 5.8(b)(v) was a residual ground for reasons other than those in (i) to (iv). Clause 5.8(c) then attached protections to some of the specific grounds. That structure showed that the parties had allocated different consequences to different reasons for termination.

The court also noted that where a break clause can only be exercised on particular grounds, the operator needs to know which ground is being relied on. That allows the operator to investigate the position and assess any protections or responses available under the agreement.

In practice, this means notice drafting and internal records matter. If your board papers, estate strategy, witness evidence and correspondence show that the real objective is disposal or surrender, it may be difficult to justify a notice framed under a different contractual ground.

Before serving a contractual break notice or a paragraph 31 notice, work through the contract and the Code in order. This case shows that sequence matters. A weak contractual foundation can undermine the statutory notice that follows.

For many businesses, the biggest risk is delay. If the notice is invalid, the process may need to start again. That can disrupt redevelopment, disposal, decommissioning or surrender plans and increase the cost of tribunal proceedings.

If you only need the short version, this case says that a site provider cannot use paragraph 31 as a workaround where the lease still controls how the agreement may be ended. The contractual route must be real, exercisable and properly used.

It also says that a catch-all break ground will not usually let a landlord avoid a more specific ground where the true reason for termination falls within that specific route.