Shopping centre owners and consumers around Australia can
celebrate the recent breakthrough announced by the Australian
Competition and Consumer Commission (ACCC).
Until now, a shopping centre owner with either Coles or
Woolworths as an anchor tenant has been prevented from leasing new
space in the shopping centre to another supermarket operator in
relation to one or more restrictive covenants in the anchor
As of 17 September 2009, both Coles and Woolworths have
undertaken (the Undertaking) not to include
restrictive covenants in new leases and not to enforce restrictive
covenants in current leases once the lease has been on foot for 5
years. The Undertaking is made under section 87B of the
Trade Practices Act 1974 (Cth) and is enforceable by the
Restrictive covenants come in all shapes and sizes and in fact
the Undertaking lists seven different types. The most common
restrictive covenant is a clause restricting the grant of a lease
to a competitor, but if granted, imposing a penalty on the shopping
centre owner if it grants a lease to a new supermarket operator in
the shopping centre. The penalty is usually in the form of a
reduction in rent to 1% of turnover, for so long as the competitor
is trading in the shopping centre.
The ACCC considers the Undertaking made by Coles and Woolworths
to be good news for shopping centre owners who will no longer be
prevented from leasing part of their shopping centre to a
competitor of either Coles or Woolworths, thereby reducing barriers
Consumer groups may also welcome this announcement, as consumers
may soon find both a Coles and Woolworths operating side by side in
the same shopping centre, increasing competition and reducing
Over 700 supermarket leases have been identified by the ACCC
containing restrictive covenants affected by this Undertaking.
The ACCC has said that it will now enter into discussions with
other supermarket operators to have them give similar undertakings
to those given by Coles and Woolworths.
Things For Owners To Consider
New leases to Coles or Woolworths should be reviewed with any
clause restricting the grant of a lease to a competitor and removed
Current leases to Coles or Woolworths that commenced more than
five years ago should be reviewed to identify where you may be able
to lease premises to a competitor
It is not clear how the Undertaking will apply to new option
leases where the occupancy under the original lease commences more
than five years ago. Whether they will they be considered new
leases or leases that have been on foot for more than five years is
If you would like advice on the effect of the Undertaking on
your existing or future lease(s) to Coles or Woolworths please call
The Council announced planning policies to encourage more inner suburban retirement village and aged care development.
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