Commercial Property User Clause Dispute Results in Victory For The Tenant

The exceptions that leases and land agreements benefited from under the Competition Act 1998 were revoked in 2010 and the recent case of Martin Retail Group v Crawley Borough Council [2013] could have wide reaching effects on Landlords and Tenants.

The case was of a small post office and newsagents, Martin Retail, whose lease was due for renewal and was contested by the Landlord who wanted to remove this type of business from the retail parade. The case revolved around a ‘user clause’ which was referred to the court for examination.

This clause was to ensure a diverse range of businesses within the retail parade where Martin Retail was located and it imposed restrictions upon the trade of each business within. The point of conflict was that the tenant argued that the restrictions imposed were anti-competitive while the landlord believed the restrictions were in the interests of good estate management.

The court found in favour of Martin Retail with the following factors:

  1. The estate management policy was not written down and there was no written evaluation of it.
  2. Not enough evidence had been provided to demonstrate economic progress
  3. Evidence was lacking that the distribution of goods would be improved through such user clause
  4. Limited evidence had been produced of the views of local residents and local traders
  5. The distance a local resident would need to walk from the parade to another convenience store which was half a mile.

The Competition Act 1998 makes agreements which restrict competition unlawful unless they meet a combination of the following four criteria for exemption:

  1. The agreement contributed to improving production or distribution or to promoting technical or economic progress;
  2. The agreement allows consumers a fair share of the resulting benefit;
  3. The agreement is indispensable to achievement of the objectives at (1) above; and
  4. The agreement does not afford the parties the possibility of eliminating competition in respect of a substantial part of the products in question.

The result of this case highlights that landlords must ensure that not only are their tenant mix policies properly documented but that evidence of the benefit of such policies are available.

If you require further advice regarding a user clause in one of your Leases or would simply like further information on this subject then please give Adam Bromley a call on 01772 220189.

This entry was posted in Commercial Property.

One response to Commercial Property User Clause Dispute Results in Victory For The Tenant

  1. rikk van says:

    tenants are a commercial real estate owners number one asset. it is priority one to have tenants happy and not get to this point where you are in court, legal costs, lost rent that you never get back. i think the moral of the story is don’t get to this point in the first place.

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