The amendments follow initiatives at the federal level to grant more powers to the Competition Bureau to better investigate and prosecute these types of property controls under the Competition Act.
Summary of amendments
Bill 31 impacts the use of:
- Restrictive covenants that directly or indirectly restrict the sale, ownership, development or use of land as a grocery store or supermarket
- Exclusivity clauses that directly or indirectly restrict the sale, ownership, development or use of land as a grocery store or supermarket granted in favour of a person (or is related to a person) who owns or operates a supermarket (“Property Controls”)
A Property Control created on or after the day that the law comes into force is void. A Property Control that is created prior to the day that the law comes into force is void unless the Property Control is registered on-title to the real property within 180 days after the day that the law comes into force (the “Limited Registration Period”).
Notwithstanding the registration of a Property Control within the Limited Registration Period, the law will grant the Municipal Board the authority to invalidate Property Controls on application by the Minister of Public Service Delivery. Members of the public will be able to apply to the Minister requesting a review of a Property Control. If the Board proceeds with a review, the onus will be on the businesses to demonstrate to the Board that the Property Control is clearly in the public interest based on several factors, including competition in the local market. No compensation is payable if the Board invalidates the Property Control.
The restrictions to the Property Controls do not apply to government agencies, municipalities, building restriction covenants, development schemes or restrictive covenants based solely on the zoning of the land or those otherwise exempted by regulation.
Key takeaways for businesses
Landlords and tenants will need to be mindful of potential issues on a go-forward basis when negotiating leases. Tenants will not be able to rely on Property Controls to limit competition in a particular shopping plaza where the plaza can accommodate more than one grocery store.
Businesses should also carefully consider the benefits and risks associated with maintaining their existing Property Controls and registering them on-title to the property within the Limited Registration Period. Businesses that intend to register their Property Controls should ensure they have the necessary paperwork to effect the registration process given the short timeframe.
As we noted in a recent blog post, amendments to the Competition Act have made it easier for the Competition Bureau and third parties to challenge Property Controls as violations of the abuse of dominance and civil agreements provisions of the Competition Act. Both provisions provide for either significant administrative monetary penalties and exposure to disgorgement claims or a claim to seek recovery of profits gained from wrongdoing. The Competition Bureau is also conducting at least one investigation into the use of Property Controls by grocers and obtained a consent remedy in respect of another use.
Due to the public nature of the registration, businesses should consider preparing back-up documentation to support the continued necessity of the property control both in case of a challenge before the Municipal Board but also under the Competition Act.
Although registration avoids the deemed invalidity of a Property Control, shortly after the registration period expires, the Registrar-General will report publicly on the registration activity. The publication of the registration activity could provide a roadmap to the Competition Bureau and impacted third parties about which lands or leaseholds have Property Controls.
If your business has questions about Property Controls in existing or new commercial lease agreements or would like assistance understanding the impact of Bill 31 or the Competition Act on your business, please contact us or any member of the competition law group or commercial real estate group at MLT Aikins who would be pleased to assist you.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.
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