Court says permitted use restriction breaks competition law

By Sarah Livestro

In a judgment that is likely to attract considerable attention, the Central London County Court has ruled that a permitted use restriction in a lease is anti-competitive and unenforceable.

Until 2011, the UK Land Exclusion Order exempted ‘land agreements’ from the ban on anti-competitive agreements. This meant that ‘permitted use’ restrictions — which restrict a tenant’s ability to carry on certain activities from leased premises — did not breach the UK competition law rules. Although the order is no longer in force, the view of the UK competition authorities — as set out in official Office of Fair Trading guidance — has always been that permitted use restrictions are unlikely to restrict competition. As a result, both landlords and tenants could be fairly confident that this type of restriction would ordinarily be legal and enforceable…

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