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restricted user in a lease; breach of competition law?

23 June 2014

The first case relating to competition clauses in leases to be considered is Martin Retail Group Limited –v- Crawley Borough Council, but this is only a County Court decision.

This was a lease renewal of premises in a shopping arcade. The landlord agreed to extend the user but only if it excluded a series of goods including other uses within Class A1 resulting in a letting scheme. The clause being in breach of the Competition Act, could it be saved by an exemption? The Council argued that the letting scheme would be beneficial to all its tenants in the parade; the Court did not accept this. No evidence was offered to substantiate the tenant mix policy. The judge accepted if the scheme was set up amongst all the tenants he might have come to a different decision.

Landlords and tenants need to be aware of the dangers of restrictive covenant provisions becoming void, particularly if it is not possible to sever the clause in question.

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