I am starting a new business and have chosen retail premises in a suitable location in a busy shopping centre. There is a clause that says the landlord can offer leases or licences to existing tenants to start a business that will compete with mine. Should I go ahead with it anyway?
Lawyer Answers (1): Answers from lawyers are general preliminary responses. They are not formal legal advice and cannot taken account of all your circumstances. They do not create a lawyer–client relationship.
Answer by Robert Bailey, Adelaide 5000 SA
- The conditions of a good lease should ideally provide security of tenure and affordable rent for the full term of the lease and not interfere with the day-to-day running or impose additional financial burdens on your business.
- Protection from competition is especially important if the business is located in a shopping centre or a cluster of shops owned by the same landlord.
- If the lease you are considering permits the landlord to offer leases or licences to existing tenants to start a business that will compete with yours then the possible effect on your profits must be taken into consideration.
- Where such a clause exists and the landlord is unwilling to either remove it or agree to compensate you for any loss of income caused through the introduction of a competing business the potential for financial loss and inability to sell the business should not be underestimated. In these circumstances it may be advisable to look elsewhere.