As of April 2011, the Competition Act 1998 will apply to property transactions. The Act catches any agreement which may prevent, restrict or distort competition in the economic market or where one party endeavours to abuse a dominant position. The introduction of this Act to property transactions will alter the way that we think.
There are four preliminary points, being:
1. The Act is retrospective in that it catches not only new but past transactions.
2. An offending provision will be incapable of enforcement and may render the whole agreement invalid.
3 A breach of the provisions of the Act can lead to fines, disqualifications of directors and claims for damages.
4. The provisions will not be judged on their wording but against the effect on the market place. This is a novel concept for us in the property business as it introduces an extraneous element over which there is little or no control.
What Will Be Caught?
The obvious area will be in respect of restrictive covenants but the effect of the Act is very wide and could, for example, catch easements which are restrictive in use.
How Much Will We All Be Affected?
The first reaction is that we will see a major shift in the way in which we consider all deals , in the commercial field and possibly even in some residential matters relating to property transactions, large or small. A more considered reaction is that many transactions although restrictive may not fall within the ambit of the Act.
The Way Forward
1. All existing Agreements, Transfers and Leases should be reviewed.
2. All new transactions should be considered against the Act to see if they are likely to be caught by its provisions or whether they will be within the exemptions that the Act permits.
At present most people in the property field have not had to consider the Competition Act. This has now changed but the effect on property transactions is still not clear. We understand that the OFT will be issuing guidelines and we will bring these to your attention as issued. These guidelines may be helpful in clarifying the situation.
In the meantime if you or your clients would like to discuss the effect of the Act on past, current or future transactions we will be happy to meet with you or them.
Contact us on 01635 521212 or through www.clmlaw.co.uk
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