Is it the end of the road for restrictions in land agreements?

Updated March 2011

From 6 April 2011, land agreements will be subject to UK competition law in the same way as other agreements. We are now less than one month away from the end of the transitional period provided so that businesses have time to satisfy themselves that their existing land agreements do not have an adverse effect on competition and are therefore competition law compliant. This is important because the application of competition law from 6 April 2011 will be retroactive.

Land agreements

For these purposes, a land agreement is any agreement that creates, alters, transfers or terminates an interest in land. For example, transfers of freeholds, leases or assignments of leasehold interests and easements.

Common clauses contained in land agreements that, dependent on the trading environment in which they operate, may infringe competition law, include (but are not limited to):

• restrictions accepted by the seller of commercial property not to sell adjacent commercial property to a competitor of the buyer;
• restrictions on user accepted by the buyer of commercial property;
• restrictions in a lease that limit the landlord's freedom to let other premises or outlets to competitors of the tenant;
• restrictions in a lease that require the tenant to purchase certain products exclusively from one supplier; and
• covenants in a lease for commercial premises that limit the type of commercial activity that may be undertaken from those premises.

Consequences for land agreements containing prohibited restrictions

This change in the law has potentially serious implications for businesses whose land agreements frequently include restrictions along the lines of those mentioned above. Whilst in many instances there is unlikely to be an adverse effect on competition, a clause in an agreement that infringes competition law will be void and unenforceable. In certain circumstances, the whole agreement will be affected. Where a restriction in a land agreement harms competition, the Office of Fair Trading may punish the parties with fines, director disqualification and, in the most serious cases, commence criminal proceedings.

How TLT can help

You may well already have reviewed your land agreements. However, if you have not and require further assistance, we have extensive experience in advising clients with property portfolios which are affected by this important change in the law.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at March 2011. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.

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