Historically, land agreements were excluded from the anti-competitive laws so parties were free to enter into covenants prohibiting certain uses of land, restricting who could buy or lease a property and requiring the tenant to purchase certain goods from one supplier. For example, in order to attract an 'anchor tenant' to a new shopping centre, a landlord may enter into a covenant restricting the use of the other units in the centre.
However, from 6 April 2011 the Competition Act 1998 (Land Agreements Exclusion and Revocation) Order 2004 will be withdrawn. More importantly, the revocation will apply retrospectively to existing land agreements, such as leases and sale contracts, so steps should be taken now to ensure that they are compliant with competition law. If any existing land agreements contain any clauses which restrict competition then they will potentially be void and unenforceable.
If the land agreement does not contain a severability clause then the whole document will be void. Further, any third party that has been adversely affected by any anti-competition restrictions could apply to the court for an injunction and damages. The Office of Fair Trading (the 'OFT') could also investigate the breach of competition law and impose fines on the offending party.
The main driving factor behind the revocation is down to the excessive control exerted by supermarkets in restricting the use of land by its competitors. Once the exclusion order has been revoked parties will have to self-assess their land agreements to ensure compliance.
Not all restrictions in land agreements will be affected by this change in law. The restriction must have a substantial, actual or potential effect on conditions of competition and trade in the U.K. If the parties involved have a low market share then anti-competitive effects are unlikely to arise. The Competition Commission has accepted that large supermarkets should be entitled to enter into exclusivity agreements for five years and restrictions relating to the tenant-mix of a shopping centre would benefit customers.
The OFT will publish guidance on how the changes will affect property transactions. However, it is unlikely that the OFT will prioritise investigations into land agreements unless there have been serious breaches of competition law.
Article written by Jenny Rogerson, a Partner at Trethowans Solicitors.
For more information about commercial property solicitor Trethowans and the services they provide, visit the Trethowans website at http://www.trethowans.com/
# # #
We can advise you on all aspects of your commercial property requirements and help maximise your investment. Whether you require advice on straightforward property transactions or more complex projects, our experienced team will deploy its expert knowledge to ensure you receive a first class and efficient service.