The UK government is cancelling with effect from 6th April 2011 the present concession that land agreements are deemed to comply with competition law. A “land agreement” is any contract or agreement that creates, transfers or deals with ownership, lease, or an option in respect of land or buildings.

Although the present law presumes that land agreements are compatible with UK competition law, it is possible that a land agreement could at present be shown to be anti-competitive. If a land agreement were shown to be anti-competitive, it could be deemed unenforceable, and the person in whose favour it was created could be fined. The presumption of compliance is no more than a presumption. The removal of the presumption will not change the underlying competition law, but it will mean that land agreements will be starting from a position of neutrality as opposed to starting from a "favoured" position.

The likely effect of the cancellation of the concession is that everyone will be more aware of anti-competitive practices in commercial property transactions, and people may feel more confident in challenging an anti-competitive clause in an agreement.

It is important that land agreements should contain a clause that preserves the remainder of the clauses as being enforceable in the event of any particular provision being held to be non-enforceable (because of competition law or otherwise).

Examples of provisions that might be struck at include granting (a) an undertaking to a tenant or inserting a clause in lease agreeing that the landlord will not allow a change of use of other existing leases or that he will not grant a lease for a competing use, and (b) a clause in a lease prohibiting the tenant from using the premises for any purpose that competes with other tenants or with the landlord’s business conducted in a nearby property.

In summary, nothing is really changing in respect of the cancellation of the concession, apart from perception, but that is far from insignificant!
 

Further information

For further information on the issued reaised in this e-zine, please contact Ken Gerber, Deborah Lovell, or David Hunter.  

This bulletin is for general information only and does not constitute legal, investment or other professional advice. Please contact us should you require advice on any particular legal issue. Anderson Strathern LLP accepts no responsibility for any loss that may arise if reliance is placed on any information or opinions expressed in this bulletin.