On 25 July 2025, the Court of Appeal issued the judgment for the case of AP Wireless II (UK) Limited v On Tower (UK) Limited (UK) Ltd [2025] EWCA Civ 971. This has provided clarity on whether a property agreement with a “minimum term” creates a valid lease or merely a contractual licence (permission for someone to do something on someone else’s land).
The main question which arose in this case was: “Does a Telecoms agreement with an indefinite rolling term (after an initial minimum term) satisfy the requirements of a lease, or is it just a licence?”
In this case a term was granted for a minimum of 10 years (the “Minimum Term”) which may then be terminated “by either party giving not less than 12 months’ notice in writing to expire at any time on or after the expiry of the Minimum Term.” This was determined as a licence and not a lease.
It was said that such a term could continue indefinitely until someone gave 12 months’ notice. This provision was found not to satisfy one of the required criteria of a lease which is that there must be a “term certain”. It was said that the term in this case was for a term uncertain and was therefore invalid and ineffective as a lease.
The distinction between a lease or licence was particularly prevalent in this case. If a Telecoms lease was found to be in place, any renewal or termination would have been governed by the Landlord and Tenant Act 1954 as the lease pre-dated the “Electronic Communications Code” (the “New Code”) relating to Telecoms which was issued in 2017. If a licence was found to be in place, the “New Code” applied.
The Court of Appeal did not follow the House of Lords decision in Prudential Assurance Co Ltd v London Residuary Body (1992) which held that a tenant entering possession under a void lease and paying a yearly rent became a yearly periodic tenant. Instead, the Court of Appeal agreed with the obiter approach taken by Lord Neuberger in Mexfield Housing Co-Operative Ltd v Berrisford (2011) in which it was said that to determine the status of the occupier under a void lease, the Court was required to provide the “best fit” with the parties’ intentions contractually.
As such, given that the inference of a contractual licence on the same terms as the agreement respected almost all the terms of the parties’ agreement, including the termination provisions, the Court should infer only the grant of a licence rather than a lease.
POINTS TO NOTE
Although this case specifically relates to Telecoms agreements, the principles relating to the differentiation between leases and licences applies to all property agreements.
This judgment highlighted the importance of precise drafting when it comes to preparing documents stipulating a party’s occupation of a property. If the parties wish for a lease to be agreed, whether in a Telecoms situation or other, the duration should be made to be unambiguous and “certain” from the outset. If the parties wish to enter into a licence, they should be careful not to inadvertently grant exclusive possession for a set term as this could make the document a lease, even if not intended to be by the parties.
Contact details
eleanor.tordoff@tyrlaw.co.uk +44(0)7908 190547 +44(0)113 322 8240
