It is not uncommon in multi-tenant buildings for a tenant to require the landlord to agree not to lease other premises in the building to other tenants, where the business would compete with the existing tenant.
This is more common in the case of multi-tenant retail buildings and developments.
However, the High Court has issued a recent decision that extends the potential of protection beyond a situation where the tenant has an express restriction clause in its lease.
In the case in question, the Court issued an interim injunction to prevent the landlord granting a lease to a new tenant who would operate a pharmacy in a medical centre where the existing tenant had operated a pharmacy for a number of years and had only recently resigned for a lease of a further term.
Although there was no clause in the lease between the landlord and the existing tenant that restricted the ability of the landlord to lease other parts of the building to a pharmacy, the court took the view on the basis of the evidence available, that it was highly likely that the lease arrangements were based on such an understanding and therefore while not express the restriction on competitive tenancies was implied in the lease.
While it was not a final decision, the court has held that there was a serious question to be reviewed by the court and therefore, granted the interim injunction.
From a legal point of view, the court considered there was a possible argument that by allowing the competitive tenancy, the landlord was offending the basic legal principal of non-derogation of grant of the existing lease.
Both the interim decision and ultimately a final decision will be of significant interest to both landlords and tenants. We will keep our clients informed of the progress in this matter.
Farry & Co. are experts in all aspects of commercial leasing, both from a landlord and tenant point of view.
If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:
Paul Farry
pfarry@farry.co.nz
09 379 0055 or 03 477 8870
The information contained in this publication is intended as a guide only. It does not constitute legal advice and should not be relied upon as such. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain.