Property developers and land owners could face fines and see
deals deemed void if they are not careful, David Hayes, head of
real estate at the Birmingham office of DLA Piper, has warned.
It follows a Government decision to place land agreements under
the rules of the Competition Act.
From April next year, leases, transfers and other land
agreements will have to meet the requirements of the Competition
Act 1988, which prohibits a wide range of 'anti-competitive'
practices such as price fixing or limiting output.
The move means those in the industry will have to consider the
implications of their agreements and whether restrictions, such as
covenants preventing specific use of land, could be seen as
anti-competitive.
Agreements that infringe the Act will be deemed void and cannot
be enforced, unless the anti-competitive clauses can be removed.
The Office of Fair Trading will also have the power to impose fines
of up to 10 per cent of the land owner's global turnover. Anyone
who is party to an anti-competitive practice could also face
private action. In order to avoid penalties, land owners will have
to justify the need for such restrictions on the grounds of wider
economic benefit.
Mr Hayes said: "While the new rules won't come into force until
April next year, they will be applied retrospectively, meaning
businesses need to start looking at their agreements now.
"Further guidance on the new rules will be issued in the autumn,
but the sooner land owners start self assessing their agreements to
identify any potential issues, the more time they will have to
change covenants as needed, to avoid falling foul of the new
legislation and incurring heavy penalties."