Exclusivity Clauses in Lease Agreements

The contentious and longrunning issues around clauses in commercial leases granting a major tenant the exclusive right to carry on a particular type of business in a centre, and a corresponding clause in the lease of another tenant prohibiting them from carrying on the same type of business, appears to have a taken another step towards a conclusion.

- Ian Jacobsberg & Nicolene Padayachee

IN NOVEMBER LAST year, the Constitutional Court upheld Masstores’ appeal against a judgment granted in favour of Pick n Pay in terms of which Masstores had been interdicted from operating as a supermarket, selling fresh food produce, in a Western Cape shopping centre.

The exclusive right to trade as a supermarket in the shopping centre in question had been granted to Pick n Pay by the landlord of the premises, Hyprop. At the time the Pick n Pay lease was concluded, Masstores was already trading in the centre, but not as a general food supermarket. In terms of its lease, Massstores had undertaken not to trade as a general food supermarket unless no other general food supermarket had been trading in the centre for at least 90 days. In its lease with Pick n Pay, Hyprop had undertaken not to allow any supermarket not already trading in the centre to be opened. Unaware of Pick n Pay’s contractual rights, Masstores began trading as a general supermarket some seven years after Pick n Pay’s lease commenced.

Pick n Pay did not seek to enforce its right against Hyprop, but sought to interdict Masstores from breaching the undertaking in its own lease, i.e. not to trade as a food supermarket.