Tip of the week: Disclaimer and business rates
A recent High Court case serves to remind landlords to consider their options carefully when a tenant's lease is disclaimed.
Published 15 August 2016
The judgment of the European Court of Justice in SIA 'Maxima Latvija' v Konkurences Padome late last year provides guidance on the anti-competitive nature of lease covenants which give the 'anchor' tenant the right to veto the grant of other leases in shopping centres.
The landlord must consider the market of the anchor tenant, both in terms of product and geographical market and determine whether the relevant market is closed to new competition and whether the Anchor's veto amplifies that restriction.
Even if the answer is 'yes' exemptions from legislation banning anti-competitive behaviour are available – (e.g. for the improvement of economic progress).
This is a complicated area of law but this judgment clarifies that allowing an anchor tenant a right to veto leases to competitors is not automatically illegal. It endorses the current market practice where such lease provisions are often necessary to secure an anchor tenant and ensure the financial viability of the development.
It does however demonstrate that if challenged, cogent evidence of the relevant market and consideration of the geographical area as a whole will be needed.
It is worth noting however that this is EU case law and its applicability once the UK has left the Union is as yet undetermined.
By Bhavini Patel
By Kerri Tyler