Currently, ‘land agreements’ are excluded from competition laws. Accordingly, land owners are free to impose restrictive covenants (eg against the use of premises for the sale of alcohol), and also include prohibited use controls into shopping centre leases. But, that may change as from 6 April 2011, when land agreements become subject to competition law.

Note that competition law will then apply to all land agreements in force as at 6 April 2011 (to that extent, it will be retrospective – so a ten-year lease granted in 2007 will be subject to the new regime). So, when negotiating new agreements it is important to bear in mind the changes that will come into effect next year. The sort of restrictions that may be viewed as anti-competitive are:

an obligation to charge prices no lower than those specified in the agreement;

an agreement not to do business in a particular area (or with particular customers);

not being able to use the premises for certain purposes (in particular, this could apply to a covenant imposed on the sale of a former pub preventing it being used for that purpose in the future); and

a covenant on a business sale, not to open a rival business within a certain period or area.

Obviously, an agreement will only be anti-competitive if it could prevent, restrict or distort competition in all, or part, of the UK.

What are the implications of a land agreement being held to be anti-competitive? The main effect is the possibility of a fine (up to 10% of a company’s worldwide turnover), but in practical terms one result may be that a particular provision becomes unenforceable (and, if the provision cannot be severed from the agreement, the entire agreement may be unenforceable). Source: Berwin Leighton Paisner.