If you are a tenant under a commercial or retail lease agreement, your landlord will likely manage the adjacent properties or shops. This is especially true if your business runs in a shopping centre. However, it can be a challenging experience if a competitor sets up shop right next to you, so it is vital to have some knowledge of what you can do. This article will explain whether landlords are allowed to engage in such behaviour and what steps you should take as a tenant if this happens.
Know which key terms to negotiate when buying a business to protect your interests and gain a favourable outcome.
Check Your Lease Agreement or Disclosure Statement
Your lease agreement may include a permitted or exclusive use clause. This clause will typically outline what your landlord permits you to do on your premises. Additionally, it may state whether this use is exclusive to you. For example, if you are operating retail premises, you can find this clause in the disclosure statement from your landlord.
In addition, check whether there were any promises or statements made to you by the landlord or an agent that your business would be the only one of its type. Indeed, you may be able to argue that these promises form part of the contract that you would not have signed up for if the landlord did not promise those terms.
Negotiate With the Landlord
In most instances, the first step is approaching your landlord regarding the issue. However, depending on whether you have agreed to terms of exclusivity, you may want to approach your discussions with the landlord differently.
It would help if you also considered what your ideal outcome might be. To be clear, this may not necessarily be the removal of the competing business.
Continue reading this article below the formConsider Termination or Assignment Options
You may consider whether exiting the lease agreement is the best option for your business. For instance, your lease agreement may contain clauses such as:
- early termination clauses, which allow a party to terminate the lease early in certain circumstances;
- mutual agreement clauses, which allow both parties to end the lease before the expiry date mutually; or
- termination for breach clauses, which allow a party to terminate the lease if the other party breaches the agreement.
If you operate under a retail lease, you may also have a statutory right to terminate the agreement. For example, this may be the case if:
- the disclosure statement includes a provision that your permitted use was exclusive to you; and
- it has now a false statement in light of the landlord’s conduct.
However, even if a right to terminate arises, terminating a commercial or retail lease before the end of the agreed term is often difficult. So, we recommend seeking advice regarding your options before you attempt to exit.
Furthermore, during negotiations, both parties agree to terminate the lease agreement, but the lease agreement does not allow for this process. Therefore, it would be prudent to formalise the termination and further agreement between the parties with a deed of release that both parties execute. Although, this deed is helpful in protecting you against future claims that may be made against you by the landlord.
Key Takeaways
It can be a frustrating experience to share your customer space with a competing business, especially if this was not the case when you entered your lease. Therefore, you should carefully consider your options before you take any action, as there can be implications for your overall lease agreement.
If you have any questions concerning a landlord allowing a competing business to run near yours, our experienced dispute lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Unless your lease agreement or disclosure statement states otherwise, there is nothing wrong with a landlord moving in a competitor next to you. However, if they make any promises or statements to you claiming that you would operate your premises exclusively, you may be able to infer those promises into the contract. However, we recommend seeking legal advice before asserting these claims.
Your first step should be to check your lease or disclosure statement to see whether you can rely on any exclusivity clauses. Additionally, seek advice on whether you can infer any promises into the contract. You should then seek to negotiate with the landlord, bearing in mind there may be other outcomes you would want to seek other than removing the competing business.
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