In December 2024, the Competition Act (Canada) (the “Act“) was amended to limit the use and scope of certain anti-competitive clauses (also called “property controls”) that are commonly found in commercial leases: (1) exclusivity clauses, and (2) restrictive covenants. In June 2025, the Competition Bureau of Canada (the “Bureau“) released new guidance on how the amendments to the Act will be interpreted by the Bureau. This article summarizes the Bureau’s guidance and provides practical tips for commercial landlords and brokers on how to negotiate property controls in commercial leasing going forward.
Anti-Competitive Clauses in Commercial Leasing
The amendments to the Act focus on two types of property controls that are commonly used in commercial leases:
- Exclusivity clauses: These clauses give a tenant the right to be the only provider of a certain product or service within a shopping centre or building. For example, a grocery store may negotiate a clause ensuring no other grocer can open in the same plaza.
- Restrictive covenants: These clauses can prevent future owners or tenants from using the property in certain ways. For example, a covenant might prohibit a parcel of land from ever being used for pharmacy operations if a nearby landlord wants to protect an existing drugstore tenant.
While these property controls are often included in commercial leases (particularly exclusivity clauses), they can make it more difficult for new businesses to enter the market, thereby reducing consumer choice.
Changes to the Act
The 2024 changes to the Act have the effect of restricting property controls in commercial leasing where the property controls unjustifiably limit competition in a market. Where the Bureau determines that a property control unjustifiably limits competition in a market, the Act provides for certain remedies that the Bureau may pursue. An analysis of the remedies available under the Act and their applicability is outside of the scope of this article.
What Makes Property Controls Justifiable?
In its June 2025 guidance, the Bureau indicated that property controls may be justifiable where they serve a pro-competitive purpose. Examples provided by the Bureau of pro-competitive property controls are those that:
- Encourage a new tenant to enter a market by providing them with an exclusivity that gives them time to establish their business without competition, or
- Incentivize an existing tenant to invest in renovations or improvements to existing premises.
Property controls in each of the foregoing examples would permit a tenant to invest in their business without having the risk of immediately competing with a similar business.
In addition to providing a pro-competitive purpose, the Bureau indicated that in order for a clause to be justifiable, it should be drafted with the following considerations in mind:
- Timeframe: The property control should be as short as is reasonably possible to justify the investment by the tenant.
- Geographic Area: The smaller the geographic area affected by the property control, the more likely it is to be justifiable.
- Products and Services: The scope of the property control should be as limited as possible with respect to which products and services are affected.
Notwithstanding that property controls may be justifiable, the Bureau guidelines indicated that exclusivity provisions will only be justified in limited circumstances whereas restrictive covenants will only be justified in exceptional circumstances. The Bureau’s firmer stance with respect to restrictive covenants stems from the fact that restrictive covenants affect the use of land by future owners.
Please note that the foregoing is merely a summary of the Bureau’s guidelines, not a legal test to determine whether a property control violates the Act.
Negotiating Exclusivities Going Forward
Many landlords and commercial leasing brokers find that it is the tenant who requests the inclusion of a property control, typically an exclusivity in the tenant’s favour, as part of the lease negotiation process. As such, it may be difficult to come to an agreement with a tenant that excludes property controls entirely. Accordingly, when drafting property clauses, landlords and brokers should consider including language that incorporates the justification for the property control in the clause itself, such as why the tenant is requiring that the landlord accept a property control, limiting the timeframe, geographic area and products and services that the property control applies to, seeking an indemnity from the tenant where the property control provision is found to violate the Act, and setting out that the landlord is not required to enforce the provision if doing so may violate the Act.
Conclusion
In light of these amendments to the Act, overly broad property control provisions may result in enforcement by the Bureau. As such, if you are negotiating a commercial lease, it is important to seek legal advice early to ensure any property controls are drafted narrowly and justifiably. The experienced commercial leasing lawyers at Soloway Wright LLP are available to help navigate the changing anti-competitive landscape in the commercial leasing context.