Retail no compete restrictions

[short timer]

Have any of been involved in local government approval of "no-compete" restrictions on local real estate? This is where a landlord or seller will enter into an agreement with a renter/buyer not to rent or sell to a similar business at the same location.

I have an old strip mall where the landlord has done this for decades without any municipal objection. Now we have a large scale (25+ acre) retail development being implemented by a national retailer and the municipality wants veto power over any "non-compete" restrictions on the several out lots that will be created.

If you ask me, I don't see a problem with preventing duplicative retail in extremely close proximity but the bosses are thinking otherwise. Any comments, examples, arguments?

[imaplanner]

Have any of been involved in local government approval of "no-compete" restrictions on local real estate? This is where a landlord or seller will enter into an agreement with a renter/buyer not to rent or sell to a similar business at the same location.

I have an old strip mall where the landlord has done this for decades without any municipal objection. Now we have a large scale (25+ acre) retail development being implemented by a national retailer and the municipality wants veto power over any "non-compete" restrictions on the several out lots that will be created.

If you ask me, I don't see a problem with preventing duplicative retail in extremely close proximity but the bosses are thinking otherwise. Any comments, examples, arguments?

Hmmmm. I've seen non-compete restrictions in leases, but never before imposed or authorized or restricted by the local government. Unless it can be specifically tied to a legitimate significant impact like traffic or wastewater discharge, I don't see how a locality either imposing or vetoing non-compete restrictions on private property would stand up to a court challenge, but I'm not a lawyer or a judge or a developer. Sometimes I'm not even sure imaplanner.

[Plan_F]

Have any of been involved in local government approval of "no-compete" restrictions on local real estate? .... we have a large scale (25+ acre) retail development being implemented by a national retailer and the municipality wants veto power over any "non-compete" restrictions on the several out lots that will be created....

Jewel Food Stores famously did that all the time — in old locations they were leaving — when they created a bigger box somewhere else in the same area (usually an old CBD for a highway corridor).

If the municipality is doing a public-private partnership where the muni is giving some kinds of concessions, I think it could stipulate that as a condition of giving them — sort of.

I don't believe it would be possible if "the deal" were to be interpreted as "contract zoning," "conditional zoning," or "resolution of intent to rezone" (as the latter is sometimes called in places where you can do it). That generally isn't permitted in Illinois. ....But as usual for Illinois' courts, that may come down to "factors." — You know, "It's Illegal." ...Then later on, a court finds, ≈[Well], not illegal, per se.≈
Here's a great link for that discusses the some of the issue in for an annexation in East Moline.

[dvdneal]

From my limited experience working with one of the big guys, they like to control what goes on in their development and would like to control things around them so they don't slow down. I've seen them do leases and other deals to make sure they get what they want, but that was all private industry deals, not city. I don't think the city can really control what specific business goes in the development or nearby unless they change the zoning or tie the permit to some other problem like traffic like IMP said. The company I worked with had some kind of incentive that if you didn't give them first refusal for your new location they wouldn't work with you if you later decided you wanted to go in. I'm not entirely sure how that worked, but again it was all private business and not city.

[short timer]

Thanks for the replies...

I'm quite familiar with them on the private side but this is the first time a municipality has asked me to "negotiate" for veto power. I'm still trying to get a meaningful answer as "why" we - the municipality - want to.

[Cardinal]

The only examples I have heard that may be similar have been when a big box is departing a location to build a new store in the same community. The city may require that the store agree not to exercise the clause on the property they vacate, so as to improve its chances of being occupied. Of course, this works when they rent. It is more difficult if they own the property they will be leaving.

[Seana]

As governments are increasingly forming partnerships with the private sector, "no-compete clauses" in their contracts are becoming issues at an increasing rate.

(Please let me know if I should expand a bit on ^this^, or if it's pretty much obvious.)