On 25 July 2025, the Court of Appeal handed down its judgment in the case of AP Wireless II (UK) Ltd v On Tower (UK) Ltd. 

The appeal focussed on whether an agreement expressed to be for a minimum term, which then continued afterwards until terminated by either party, should be construed as either a lease or a contractual licence. 

The implication of such classification is that different legislation will apply – either the Electronic Communications Code (‘Code’) or the Landlord and Tenant Act 1954 (‘1954 Act’). This distinction has a significant impact on termination and renewal rights, as well as rental valuation, as the Code is generally regarded as being more telecoms operator friendly (with the 1954 Act being more landlord-friendly).

Case summary

The telecoms operator On Tower occupied the site under an agreement originally granted in 1997 and installed its telecoms masts and equipment on the land. 

The agreement was expressed to continue for a minimum period of 10 years (from 11 March 1997) and could then be terminated by either party giving 12 months' notice, expiring on any day after the minimum term. The Court of Appeal had to decide if the term of the agreement expressed in this way was clearly ascertainable when the parties entered into the contract, which would mean it was a "term certain" and would meet the requirements of a lease.

On Tower sought to terminate the agreement and enter into a new agreement under the Code, which would only be possible if the agreement was a licence rather than a lease.

Court of Appeal's decision

The Court of Appeal’s judgment was that the term was uncertain and invalid because it was “capable of lasting for an indeterminate period” and “the length of the tenancy purportedly created could not be determined when the Agreement was entered into.” Despite the telecoms operator having been granted exclusive possession of a specific site and paying a rent – the absence of a term certain meant that the agreement was a contractual licence and not a lease. A contractual licence is a personal right to occupy and not a legal estate in land.

The Court reinforced that it will look at the substance of an agreement - parties cannot bypass leasing requirements by using manipulative labels or drafting. It is a long-established principle that labelling an agreement a ‘licence’ when exclusive possession is given to an occupier for a defined term will result in a lease. Conversely, an indefinite term as seen in this case cannot create a lease even if the original parties intended it to be so. Interestingly both parties to this case were assignees so they were unable to speak to the intentions of the original parties.

Key takeaways

So called “auto-renewal” provisions are common in telecoms and data centre agreements, and so careful drafting is required to ensure that the term (and any extension thereof) is expressed in a precise manner. If the parties intend to grant a licence, ensure that the provisions do not stray into leasing principles such as exclusive possession. 

As ever, clear and unequivocal drafting is required to ensure that an agreement takes effect as the parties intend.