Amendments to Canada’s Competition Act have introduced new uncertainty around restrictive use and exclusivity clauses, provisions found in nearly every commercial lease in the country. For decades, these clauses were treated as routine risk-allocation tools, allowing tenants to secure competitive protections and landlords to manage the tenant mix.
The amended legislation now positions them as arrangements that may prevent, lessen, or restrict competition, bringing them within the reach of the Competition Bureau and the Competition Tribunal. The legal framework for enforcing these clauses has yet to be tested, leaving practitioners across retail, office, and industrial leasing to navigate a changed regulatory landscape without clear judicial guidance.
A Shifting Standard
Exclusive use clauses are among the most routine provisions in Canadian commercial leasing. A grocery store secures a covenant preventing another grocer from operating in the same shopping center. A fitness operator restricts competing gyms from using the same building. A quick-service restaurant chain limits the number of similar food concepts in the same retail corridor. These arrangements have been negotiated and enforced for decades as standard risk allocation between landlords and tenants.
That may be changing. Cassandra Da Re, partner and chair of the commercial leasing department at Dale & Lessmann LLP, says amendments to the Competition Act have created a new legal framework. The amendments reframe exclusivity not as a private contractual matter between two parties, but as a potential competitive property control subject to public interest scrutiny.
“We have not seen very much case law that actually applies the new laws to leases, but we know it’s coming,” Da Re says. The question is not whether the Competition Bureau and the Competition Tribunal will eventually turn their attention to these clauses, but how they will apply the new framework when they do.
Why Uncertainty Matters
The absence of case law does not mean the issue is dormant. The legal uncertainty is already changing how practitioners approach lease negotiation, even before enforcement actions materialize.
The potential scope of disruption is broad. Exclusivity and restrictive-use clauses appear in retail, office, and industrial leases, as well as franchise agreements, across every province. Any landlord currently enforcing an exclusivity clause, any tenant relying on one for competitive protection, and any lawyer drafting a new one is operating in a legal environment that has changed but has yet to produce clear guidance.
The Competition Act amendments targeted what the legislation describes as competitive property controls, arrangements that may prevent, lessen, or restrict competition by controlling the use of real property. Exclusive covenants in leases fit within that description, at least on their face. Whether any particular clause crosses the line from a legitimate commercial arrangement to an unlawful competitive restriction will depend on factors the tribunal has not yet fully articulated.
Drafting and Enforcement
These unresolved questions are already creating practical challenges for commercial real estate lawyers.
For those drafting new leases, the challenge is writing exclusivity provisions that serve legitimate business interests while reducing exposure to competition law challenges. That may mean narrowing the geographic scope of restrictions, limiting the duration of exclusive covenants, or tying exclusivity to specific product or service definitions rather than broad category descriptions. It may also mean including language that explicitly addresses compliance with competition law, though whether such language provides meaningful protection remains untested.
For landlords enforcing existing exclusivity clauses, the new framework introduces a potential defense that tenants did not previously have available. A tenant in breach of a use restriction could argue that the clause itself is unenforceable under the Competition Act, turning a straightforward lease enforcement matter into a complex competition law proceeding. That prospect alone may change how landlords calculate the cost and risk of enforcement.
“How we negotiate restrictive use clauses or exclusivity clauses, how we paper them, how they get enforced – that’s what I’m watching right now,” Da Re says.
Watching First Cases
Da Re’s practice spans retail, office, and industrial leasing across Ontario and nationally, giving her a broad view of how these clauses are currently being negotiated and where pressure points are likely to emerge first. The retail sector, where exclusivity clauses are most commercially significant and most actively negotiated, is among the sectors where early enforcement activity is most likely to surface.
“When the time comes, how the Competition Bureau and the Tribunal look at those clauses and question their enforceability – that’s a really unique Canadian perspective, but it affects leases across the country,” she says.
According to Da Re, practitioners who understand both the drafting and strategic implications of these provisions will be better positioned to build clauses that can withstand future scrutiny. Those who begin stress-testing their exclusivity language now, before enforcement cases establish binding precedent, will be better positioned than those who treat the issue as a future problem. The first significant tribunal ruling on this question could reshape standard lease practice across Canada almost overnight, turning what has long been routine contract language into a live regulatory risk.
About the Expert: Cassandra Da Re is a partner and chair of the commercial leasing department at Dale & Lessmann LLP, with a practice spanning retail, office, and industrial leasing across Ontario and nationally in Canada. Her work covers lease drafting, negotiation, and enforcement across all major commercial property types.
This article is intended for informational purposes only and does not constitute legal, financial, or investment advice. The views and opinions expressed herein reflect those of the individuals quoted and do not represent an endorsement of any company, product, or service mentioned. Readers should conduct their own due diligence and consult qualified professionals before making any investment decisions.
