Irish Competition Authority Decisions

1. Notification was made by Baytrust Ltd on 29 September, 1992 with a request for a certificate under Section 4(4) of the Competition Act 1991 or, in the event of a refusal by the Competition Authority to issue a certificate, a licence under Section 4(2), in respect of a lease between Baytrust and its tenants at Old Douglas Premises, Wexford/Montague St, Dublin 2.

2. The notification concerns the standard lease relating to shops and offices at the Old Douglas Premises between Baytrust Ltd as Lessor and tenants of the building.

3. Baytrust Ltd is the landlord of the Old Douglas Premises and is the holding company for subsidiary companies engaged in the letting of shop units at shopping centres. The tenants are engaged in various retail and office activities at the Old Douglas premises which comprises of shops at ground floor level and offices overhead.

4. The standard lease notified in respect of office premises contains the following restricted user clauses viz

(a) Under clause 14 the lessee covenants "..........not to use the demised premises or permit same to be used save as offices and storage."

(b) Under clause 19 the lessee covenants "Not to assign, sub-let, part with or share possession or occupation of the demised premises or any part thereof or otherwise alienate same or suffer any person to occupy the demised premises or any part thereof ..........without the consent in writing of the Lessor (such consent in the case of an assignment or sub-letting of the entire of the demised premises not to be unreasonably withheld) PROVIDED ALWAYS....."

In addition there are a number of other standard restrictive covenants and obligations in the lease.

5. The notifier has advised that the permitted user under clause 14 in relation to the shop units is "....as a retail shop".

6. The Authority considers that Baytrust Limited and the tenants are undertakings and that the notified standard lease is an agreement between undertakings. The agreement has effect within the State.

7. The lease agreement contains standard restrictions and obligations on both landlord and tenant which are necessary for the maintenance of the landlord/tenant relationship in respect of the tenancy. These do not raise issues under the Competition Act. In addition the agreement also provides, by way of the permitted user clause 14, some restriction on the use of each premises but which effectively allows each premises to be used for the purpose of the business of the tenant. Such permitted user clauses are normally based on the user proposed by the tenant at the time the lease is first executed but are also governed by considerations such the physical characteristics of the premises, the requirements of the Planning Acts and the landlord's own policy, when granting the lease, on how the premises should be used. The Authority considers that such user restrictions in the letting of premises do not have the object or effect of preventing, restricting or distorting competition in the State or in any part of the State. In taking up the lease the tenant negotiates the permitted user required for his business. This is reflected in the lease but if he were subsequently to seek a change of user he could in most instances have recourse to the provisions of the Landlord and Tenant Act 1980 which provides that a landlord cannot unreasonably withhold consent to change of user requested by a tenant. In addition the tenant is free to undertake other businesses in many other premises, both in the vicinity or elsewhere in the State. The object or effect of such permitted user clauses in lease agreements are not therefore anti-competitive. The Authority therefore considers that the notified standard agreement between Baytrust Ltd and the tenants do not offend against Section 4(1) of the Competition Act, 1991.

8. The Competition Authority has issued the following certificate:

The Competition Authority certifies that in its opinion, on the basis of the facts in its possession, the standard lease agreement between Baytrust Ltd and its tenants in relation to the lease of premises at Old Douglas Premises, Wexford/Montague St, Dublin 2 notified under Section 7 on 29 September 1992 (CA/165/92E), does not offend against Section 4(1) of the Competition Act, 1991.

For the Competition Authority

Des Wall

Member

15 December 1993.