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Developers warned over Competition changes

Developers and landowners have been warned that they could face a 'shifting of the goalposts' as changes to competition rules regarding property acquisition kick in.

Amendments to the Competition Act 1998, which came in to force recently, will now apply to a far broader range of property agreements.

The legal changes were originally developed in the controversial context of 'land banking', a particular problem in the retail world where supermarkets were accused of buying land and deliberately leaving it unused in order to block the development of competing stores.

Specific regulations were brought in last year to deal with supermarkets, but now all land agreements are fully exposed to competition law.

Under the new regime, the use of 'exclusivity' provisions, and disposal restrictions in land agreements commonly used by landowners and tenants, could be unenforceable or lead to litigation if they are likely to have an impact on competition or restrict choice.

Tracey Menzies, a partner and commercial property specialist at legal firm McGrigors in Aberdeen, said: “Even though sizeable fines are unlikely in most cases, we are likely to see renegotiations as developers and tenants get to grips with the changes which will apply to all existing agreements.

“The real impact of this is likely to be the revisiting of land agreements," says Menzies. "People will need to sit down and review various arrangements such as leases. If you, as a business, put a lot of money into getting a new development off the ground in the past, and now find that the goalposts have moved, you might reasonably want to check that you can either claim the full benefit of the original bargain or escape from the original restriction."

In addition to this, there is also potential for greater litigation, noted Menzies:  "Parties may flout a restriction, claiming that is illegal and therefore unenforceable. It will then be up to the other party to try to enforce the restriction through the courts.

“If you are a struggling business with nothing to lose, this might seem like an attractive punt. Competitors too can bring claims for damages under competition law, so we may see some nuisance-making in the coming months. "

On a positive note Menzies does not believe businesses need be overly concerned about regulatory investigations. She added: "The OFT has stated that it is unlikely to take interest where the parties have more than a 30% share of the relevant market, although it's important to note that land markets can have surprisingly small geographic areas."

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