How does the Digital Economy Act affect exercise of break clauses

Alex Charlesworth • 02/04/2020
In the two years since the Digital Economy Act 2017 came into effect, it is clear that it is causing considerable alarm to occupiers looking to issue break notices, as the ability to break may now be jeopardised.

The act amends the Electronic Communications Code with effect from 28 December 2017. The code does not just apply to rooftop and mobile telecoms installations; it also covers agreements to supply network cabling and services to occupiers (often for fixed-line telecoms/internet connections), and the termination of those agreements.

An occupier must give 18 months’ notice to terminate a code agreement. Operators can oppose this and have three months to serve a counter-notice and apply for a court order for that agreement to continue.

Once an agreement has been terminated, if the operator hasn’t removed its equipment, an occupier must serve a further notice giving them a reasonable period of time to remove the apparatus. The occupier can apply to a court for an order enforcing or granting removal rights.

At a minimum, the time period will be 18 months, plus the time taken to remove the equipment. Our recommendation is to start the process at least 2 years ahead of any break date.

Operating a vacant possession break clause may be invalidated by the presence of telecoms equipment for two reasons:

  • First, breaks often require the termination of third-party rights. The landlord or purchaser must be able to assume and enjoy immediate and exclusive possession, occupation and control of the premises. The longer notice periods in the code compared with most break clauses may mean you cannot meet these requirements unless you serve your code notice before you serve your break notice.

  • Second, the property must be empty of chattels where these substantially prevent or interfere with the enjoyment of the right of possession over a substantial part of the property. In the case of data cabling and telecoms equipment, there has been no legal clarification and it is safest to err on the side of caution. All telecoms equipment should be removed from the premises by the break date, unless (in the case of fixed line connections) the landlord expressly agrees to it being retained, perhaps for the benefit of an incoming tenant.

In summary, to comply with a vacant possession break clause, a well-advised tenant will ensure sufficient time for terminating and removing any telecoms rights and equipment.

Co-authored with Alison Hardy External Link, a Partner at Ashurst.

This article was first published in Property Week 27 March 2020


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