Competition law to ‘bite’ land agreements

The Department of Business Innovation & Skills (BIS) confirmed recently that the government had decided to repeal the Competition Act 1998 (Land Agreements Exclusion and Revocation) Order 2004 with effect from 6 April 2011. The current position is that all “Land Agreements” are afforded an exemption from the Chapter 1 Prohibition set out in the Competition Act 1998. Land Agreements include all agreements between undertakings which create, alter, transfers or terminates an interest in land, or an agreement to enter into such an agreement together with certain obligations and restrictions e.g restrictive and positive covenants.

The Chapter 1 Prohibition under the Competition Act 1998 prohibits agreements between undertakings which may affect trade within the UK and which have as their objective or effect the prevention, restriction or distortion of competition within the UK.

Assess compatibility with Competition Law

From 6 April 2011 parties to Land Agreements will have to assess their agreement for its compatibility with Competition Law in the same way as other types of agreements in commercial transactions. Any agreement caught by the Chapter 1 Prohibition renders it automatically void and unenforceable and obviously this poses a serious concern for land owners. The revocation of the Order may have far reaching consequences and will certainly be a cause of concern for landowners who may be currently preserving their business interests, through reliance on restrictive covenants imposed over sold-off neighbouring properties.

Competition Law is a highly complex area of law involving an appreciation of many factors including taking into account the products concerned and the geographic locality and thus the Office of Fair Trading is expected to publish revised guidance on the application of Competition Law to Land Agreements in autumn 2010. The guidance is eagerly awaited as it will allow legal advisors to assess existing agreement which may be caught by the Chapter 1 Prohibition which is intended to take effect restrospectively. Until such time land owners should be wary of disposing of land where such disposals could potentially end up in a competitor’s ownership.

If you have any questions or concerns that arise from this article then please contact Kimat Singh of Kerseys Solicitors.