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11th September 2020

Supreme Court Upholds Enforcement of Shopping Centre Restrictive Covenant

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In the early 1980s a shopping centre was built on land in Londonderry. The lease to the anchor tenant contained a restrictive covenant that any development on the remaining land would not contain a large unit for the sale of food or textiles. In 2010 the then landlord of the shopping centre issued proceedings for, amongst other matters, a declaration that the restrictive covenant was unenforceable as an unreasonable restraint of trade.

The case was heard at the Northern Ireland High Court and Northern Ireland Court of Appeal. At first instance it was held that the doctrine of restraint of trade ceased to apply on assignment of the freehold reversion but the Court of Appeal held that there was no public policy reason for the doctrine to cease to apply. This meant that the restrictive covenant would be unenforceable. The tenant appealed to the Supreme Court.

The Supreme Court held that it has long been accepted and normal for the grant of a lease in part of a shopping centre to include a restrictive covenant on the part of the landlord in relation to the use of other parts of the centre. The covenant did not (on public policy grounds) engage the doctrine of restraint of trade and the covenant was enforceable. The landlord could however seek to modify the covenant under the Northern Irish equivalent to application to the Lands Tribunal. The case is a reminder that any novel covenants that are wider than what is considered the “norm” could be challenged as restraint on trade or as uncompetitive under Competition Law.

For further information on this or assistance on commercial property matters please contact Julian Bishop on 020 7400 6583 or click here to email Julian.