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.
Says a spokesperson: “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’, the buying of land and deliberately leaving it unused in order to block its development by a potential competitor.
“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.
“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 per cent share of the relevant market, although it’s important to note that land markets can have surprisingly small geographic areas.”
Ends
Notes to editors
McGrigors is a leading law firm with offices in London, Edinburgh, Glasgow, Belfast, Aberdeen, Manchester and the Falkland Islands. With around 100 partners and a total of more than 700 staff across the UK and overseas, McGrigors is well placed to advise clients, including national and multinational organisations in the private and public sectors, on a wide variety of commercial issues. McGrigors is one of the UK’s top 50 legal firms, and was named National Law Firm of the Year 2010 by The Lawyer magazine.
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