We have seen our first court ruling on competition law issues in a lease renewal case and this is news given the uncertainties the real estate world is facing from 6 April 2011 when competition law starts to apply in full to all real estate transactions.
The case is a preliminary skirmish in a dispute about a lease renewal for the oil terminal at the Port of Immingham. Humber Oil and its landlord Associated British Ports (ABP) (both large scale commercial enterprises) are in competition with each other to provide the same service. The case raises interesting issues for anyone in a dominant position in their market with the obvious examples being the owners of other ports, motorway service stations, airports and some shopping centre owners.
During the Humber Oil Terminals Trustee Limited v Associated British Ports case, ABP accepted that they were in a dominant position in their market. Under the Landlord and Tenant Act 1954, the tenant had a right to request a new lease at an open market rent, but ABP used one of the limited statutory grounds to oppose thisspecifying that they required the terminal for their own use. This was following years of inconclusive negotiations during which ABP requested a high rent for the new lease.
The question was, did the landlord abuse its dominant position by relying on its statutory right to oppose the grant of a new lease or by requesting a high rent in the lease negotiations? The High Court (in a preliminary judgement about pleadings) said this could not be argued by the tenant in its application for the new lease but we have not necessarily heard the last of this case or the issues involved.
The tenant had 1954 Act rights to a new lease so the landlord’s proposal of high rent figures were just part of a negotiation and could not be an abuse of a dominant position. The Court had jurisdiction to decide the rent if the parties did not agree.
The tenant only started to argue competition law issues at a late stage in the case and may have been using this as a tactic to try to negotiate a rent at less than market rate which is what would be awarded on a 1954 Act lease renewal.
What landlords in a dominant position face when dealing with tenants or occupiers who do not have 1954 Act rights is, however another thing. Careful pleading of anti-competitive behaviour at the right stage of a transaction could cause a dominant landlord to have more competition law worries than ABP faced here.
The High Court emphasised the serious nature of allegations of anti-competitive behaviour and criticised the tenant’s pleadings in the case because they had not dealt with the facts adequately. The landlord was left not knowing what anti-competitive behaviour it needed to defend. The Court also confirmed the fact that competition law cannot be used to prevent profit and there is a growing recognition in competition law cases of the need for those who provide vital infrastructure in the UK to make the profits necessary to justify future investment.
However, the competition law issues relating to the landlord requiring the property for its own use may come up in the next stage of this case (if it continues) when the landlord defends the tenant’s claim for a new lease to be granted to it.
Land owners will need to understand if they are in a dominant position in their market and any businesses relying on potentially anti-competitive restrictions should consider their approach to property transactions in this light.