The federal government’s plan to curb lease clauses that keep competing businesses out of nearby shopping centres and other commercial properties is drawing new attention to a long‑standing practice that some developers say complicates day‑to‑day leasing.
Lease clauses that give anchor tenants the right to approve what tenants can open locations in the property, a practice critics say can reduce competition and keep prices higher for consumers, have become an operational risk for landlords, John O’Connor, senior managing director and head of acquisitions and development at U.S.-based O’Connor Capital Partners, said in an interview.
“These clauses can sit in a lease for decades and suddenly block a tenant you never expected,” said O’Connor, who follows developments in the Canadian retail market. “They can cover everything from how many parking spaces a tenant can use to which categories are allowed in a centre.”
There have been changes on several fronts. While commercial leasing is regulated by provinces, changes to the federal Competition Act have expanded the Competition Bureau’s ability to challenge what it considers to be anti‑competitive practices, including exclusivity arrangements that can block new entrants.
Updated abuse‑of‑dominance provisions clarify what harmful conduct looks like, giving the agency a clearer basis to intervene when a dominant company pressures landlords or suppliers to shut out rivals.
Separately, the bureau has opened investigations, now ongoing, into grocery chains over their use of property controls, as public concern over food prices and limited consumer choice has intensified. Ottawa has also indicated interest in going further, though how any additional measures would apply, and whether they would affect existing leases, remains unresolved.
A spokesperson for the Competition Bureau said restrictive property controls in the grocery sector remain a concern and confirmed that the agency’s investigation is ongoing. “Protecting and promoting competition in the grocery industry continues to be a priority,” the spokesperson said.
The spokesperson noted that recent amendments to federal competition law have strengthened enforcement tools, including clearer abuse‑of‑dominance rules and higher penalties. While some companies have voluntarily removed such controls, the Bureau said the practice remains widespread and is being closely monitored.
Loblaw, Empire and Metro did not reply to multiple requests to comment on the proposed changes to restrictive lease clauses.
Provinces regulate restrictive leasing covenants
Commercial leasing falls under provincial jurisdiction, allowing provinces to regulate or ban restrictive covenants directly. Manitoba did so in 2025, when Bill 31, the Property Controls for Grocery Stores and Supermarkets Act, was passed by the provincial legislature.
The legislation bans restrictive covenants and exclusivity clauses in grocery leases that the province says were limiting competition and making it harder for independent grocers to enter local markets.
In a recent enforcement example, Sobeys parent Empire Co. Ltd. agreed early last year to remove a long‑standing property control at its IGA in Crowsnest Pass, Alberta, after the Competition Bureau determined that exclusivity clauses restricted competition in the town of about 6,000, where the IGA outlet is the only grocery store.
Some landlords argue the political focus on restrictive‑use clauses overstates their real‑world impact.
Michael Zakuta, co‑founder of Montreal‑based Plaza Real Estate Investment Trust, said grocers typically avoid locating next to competitors, regardless of what the lease language allows.
“If there’s already another grocer right there, they’re not going to want to go in anyway,” Zakuta said in an interview. “You need your anchors. If you don’t have that, you don’t have a shopping centre."
From a U.S. investor’s perspective, developers say the greater risk lies not in competition itself but in how long restrictive clauses remain embedded in leases.
O’Connor said provisions written decades ago can suddenly block a type of tenant that a landlord never anticipated. “The retail market changes every six months,” he said. “You can have something in a lease that suddenly blocks a tenant you never even thought of.”