Czech Republic: Restrictive clauses in lease agreements
Restrictive clauses appear frequently in commercial lease agreements. These provisions can prevent landlords from leasing to competing tenants, confine tenant business operations to specific geographic zones, or regulate property subletting. Violations typically incur substantial contractual penalties.
While these restrictions may seem straightforward applications of party autonomy, closer examination reveals potential complications.
Intervention Against Restriction of Retailers
The Czech Competition Authority addressed restrictive lease provisions for the first time in a significant case. The agency sanctioned a company operating an outlet centre near Prague for breaching the Czech Act on the Protection of Competition.
The problematic lease agreements restricted tenants from conducting business at another outlet centre within a defined geographic area. The landlord sought to maintain exclusivity for its facility.
However, the authority deemed these restrictions as unlawful agreements that distorted competition across commercial leasing markets within a 60-minute driving radius and in localized commercial lease zones. The authority issued a fine and demanded removal of the restrictive language, noting the restriction period exceeded five years.
Thoughts
Lease agreements featuring restrictive provisions lasting beyond five years warrant avoidance. When evaluating such clauses, stakeholders must assess both tenant and landlord market positioning.
For tenant-favorable restrictions, tenant market strength requires consideration. Landlords should evaluate their own market position relative to the specific property category involved in the lease.