Using anti-competition provisions in land agreements

Since April 2011, land agreements (including leases) have been subject to the Competition Act (the Act) but since then there have been few cases on the matter of potentially anti-competitive provisions in property documents.

The guidance issued by the Office of Fair Trading when land agreements became subject to the Act stated that: “There are many legitimate reasons why a person or business may impose or agree to restrictions which affect or limit the way in which land may be used or how a right over land may be exercised in a land agreement. Such restrictions do not necessarily infringe competition law and the OFT expects that only a minority of restrictions will do so.”

This provided some comfort to those with the benefit or intending to have the benefit of restrictions imposed on property. However, the recent reported case of Martin Retail Group v Crawley Borough Council shows how significant and wide ranging the Act can be.

This case related to a user clause in a lease of a property in a parade of shops which was granted by a local authority landlord. The landlord had argued that a provision which restricted use of the shops was to help preserve a diversity of traders in the parade for good estate management purposes. The tenant wanted to extend its use to become a convenience store which would have resulted in it competing with another tenant in the parade and the landlord did not want to allow this.

The court found that the landlord had not produced sufficient evidence to justify its tenant mix policy, so was unable to impose the restriction on the tenant.

While this case relates to tenant covenants in leases, it serves as guidance for other land restrictions and exclusivity arrangements as well.

Not all restrictions will be anti-competitive and even some that are may be subject to exclusions.  Therefore, if you may have the benefit of, or are subject to such restrictions, or are in the process of agreeing such matters, careful consideration should be given to all the factors and evidence which will determine the enforceability of such restrictions.

For more information on this, or any other commercial property matter, contact Simon England on 01772 258321. Simon is an expert in the law surrounding commercial property and works at Harrison Drury solicitors in Preston.