Published: 03 February 2010 in Independant Retail News January 2010
Q. The lease on my shop is due for renewal in the summer. I want to do a re-fit and start selling a bigger range of produce but I have a restrictive covenant that limits me to selling only CTN related items. Is there anything I can do about this?
What is a restrictive covenant?
Restrictive covenants in leases can be there for a number of reasons but in this case it is likely to be there because the landlord owns a number of properties in the same block or area. The general aim is to prevent retailers competing with each other directly in order to protect the collective group. In theory they can be a good idea if everybody abides by them and the landlord polices them correctly. However many CTN based stores have been trading from the same premises for many years and the nature of these covenants quite often doesn’t reflect the industry sector or indeed the high street as it is today. Many landlords choose simply to ignore what is going on as it can cause conflicts.
Can I do anything about it?
Lease renewal time is a good opportunity to engage in dialogue with the landlord to see if changes can be made. In this case you should highlight to him what plans you have to make your business competitive and why. His response will probably depend upon what is happening with any other tenants. If the shop has changed hands and any new landlord only owns one property, then the new owner is less likely to have a problem with removing it. If the landlord is reluctant to remove the clause entirely then it might be possible to negotiate a change that allows you to sell some of the products you want to but not all. It’s all down to negotiation so remember if you don’t ask you don’t get.
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