Irish Competition Authority Decisions

1. Notification was made by Comeragh Properties Ltd (Comeragh) on 30 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 Comeragh and Cara Data Processing Ltd.

2. The notification concerns the leases of units 1 to 4 at the Sheraton Centre, Glasheen Rd, Cork between Comeragh as Landlord and Cara Data Processing Ltd as tenant.

3. Comeragh, a wholly owned subsidiary of FBD Insurance plc, is the landlord of units at the Sheraton Centre. Cara Data Processing Ltd is engaged in the business of computer services.

4. The notified lease was executed on 29 August 1985 for a term of 35 years from 15 May 1983. The restricted user clauses in the lease are as follows:

(a) Under clause 3.02(3) the tenant covenants "To keep the demised premises for the purpose of:- Offices

Provided always that the demised premises or any part thereof, shall not be used for the sale, vending, consumption or otherwise of any type of foodstuffs on the said premises for human or animal consumption only and not without the Landlord's consent in writing, which consent shall not be unreasonably witheld, to use or permit or suffer the same or any part thereof to used for any other purpose.

(b) Under clause 3.02(5) the tenant covenants with the landlord "Not to assign, transfer or underlet or part with possession or occupation of the demised premises or any part thereof or suffer any person to occupy the demised premises or any part thereof as a Licensee BUT SO THAT NOTWITHSTANDING the foregoing the Landlord shall not unreasonably withhold its consent to an assignment of the entire or underletting of the entire of the demised premises subject to ...."

(c) Under clause 15 of the Fifth Schedule the tenant covenants "Not to carry on itself, nor to allow to be carried on by any subtenant of the Tenant any of the following professions, businesses or occupations, at the demised premises:-

(a) Life assurance, underwriters, brokers or agents,

(b) Insurance, underwriters, brokers or agents.

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

5. The Authority considers that Comeragh and Cara Data Processing Ltd are undertakings and that the notified lease is an agreement between undertakings. The agreement has effect within the State.

6. 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 3.02(3) and under the Fifth Schedule, restrictions on the use of the premises but which effectively allows the 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 as 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 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 withold consent to a 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 agreement between Comeragh Properties Ltd and Cara Data Processing Ltd does not offend against section 4(1) of the Competition Act, l99l.

7. 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 agreements between Comeragh Properties Ltd and Cara Data Processing Ltd in relation to the lease of premises at Sheraton Centre, Glasheen Rd, Cork notified under Section 7 on 30 September 1992 (CA/312/92E), does not offend against Section 4(1) of the Competition Act, l99l.

For the Competition Authority

Des Wall

Member

15 December 1993