A review of the legal & commercial issues of ground sharing in the Premier League & Premiership Rugby
Published 05 September 2016 By: Tom Cripps
The first part of this article ("Part 1")1 considered the regulatory conditions for assessing and approving applications to ground share by clubs in the Premier League (EPL) and Rugby Premiership (ERP). Notwithstanding League approval, prospective parties must also negotiate the terms of any such ground sharing agreement between themselves. This second installation will look at the legal and commercial considerations for clubs during their negotiations. It is intended only to introduce the basic points and will not provide a detailed legal analysis of each distinct area of law.
In writing this article, the author had the opportunity to meet with Nigel Wray, Owner and Chairman of the ERP champions Saracens RFC. Wray orchestrated the club's move from Watford FC's Vicarage Road, after a 15-year ground share, to their own Allianz Park, Barnet. Wray is uniquely placed to understand the issues around ground sharing and provided valuable insight. The author also consulted a number of ground sharing agreements and will refer to some example clauses.
LEGAL FORM OF AGREEMENT
There is no prescribed form of ground sharing agreement. As discussed in Part 1, such agreements are required to be legally enforceable. In basic contract law, to be legally enforceable an agreement should demonstrate that an offer was made on clear terms that were accepted, in return for some consideration and with the intention of creating a legally binding relationship. Land Law also requires that contracts for land be in writing and meet certain requirements in order to be valid (see for example section 2 of the Law of Property (Miscellaneous Provisions) Act 1989).
Legally enforceable agreements for the use of real property usually take the form of either a lease or licence. The crucial difference between the two is that a lease gives the lessee, or tenant, exclusive possession, thus creating an interest in the property. A licence does not give the occupier exclusive possession or the right to exclude third parties. It merely grants the guest team certain rights to access and use the property.
What the agreement is labelled on its face is not determinative of its status. Courts will look at substance as well as form. Given that when ground sharing, the home team will continue to play its home fixtures at the stadium, any contract for occupation will likely be a licence, sometimes also known as a concession.
Licences have advantages and disadvantages for both parties. They do not fall within the protection of the Landlord and Tenant Act 1954, which confers rights on business tenants to remain on the property after the expiry of the contract. This gives licensees less security and licensors greater flexibility. However, licences do not attract Stamp Duty Land Tax and licensees are typically not obliged to pay business rates.
Ground sharing agreements will usually be made between the two sharing clubs; the owner and/or primary occupier of the stadium (whether freeholder or leaseholder) and the guest club. For example, the Ricoh Arena is owned by Wasps RFC as freeholder, who grant a licence for its use to Coventry City FC. This will generally also be the case where the primary occupier is not the freeholder but owns a long leasehold.
Multipurpose or third-party owned stadia (i.e. those not owned by the primary occupier) will have more complex arrangements. In such circumstances, the third party owners will grant a licence to each occupier. For example, West Ham’s licence for use of the Olympic Stadium is made with the stadium’s long leasehold owner, E20 Stadium Limited. Numerous other sporting clubs and bodies will also enter licences for use with E20 to which West Ham will not be a party, but provisions should be included within each to take account of the other users.
In general terms, Courts are less willing to interfere with the terms of a licence than that of a lease. It is therefore of paramount importance that the parties negotiate carefully to ensure they achieve a beneficial deal, which clearly sets out all relevant terms. The following legal and commercial points are some of the key considerations.
It is crucial for both parties that the length of the term of the licence is set out clearly within it, so as to avoid any confusion as to when it expires. The clubs are then theoretically bound to the agreement for the length of that term, subject to any termination provisions. In light of rule K.3 of the EPL Handbook and Article 2, Clause G2 of the ERP's MSC, ground sharing agreements must not expire earlier than the end of the current season and the relevant provision(s) in the licence should reflect this.
As discussed above, licences do not create an interest in the property for the licensee. Consequently, they confer less security on the parties during the term as they are easier to terminate than a lease. Typically, a Lease can only be brought to an end by the expiry of its term, the operation of a break clause (if included), or by forfeiture for breaches of covenant. Even then, courts and the law are highly protective of lessees and depending on the circumstances, readily willing to intervene and reinstate a tenant.
With licences, it is a question of construction of the agreement that will determine how and when a licence can be terminated by either party. In the absence of a specific notice period set out in a termination provision, courts will generally only require reasonable notice to have been given2.
When deciding what constitutes reasonable notice, courts will consider context and the overall factual matrix3. For example, recalling Part 1, a key objective of the Leagues' regulations is to provide scheduling certainty to League and broadcasters; the courts may consider a club’s ability to meet this objective. However, for peace of mind and to avoid falling foul of League regulations, clubs would be advised to negotiate for an express provision within the licence, providing for adequate notice of termination. Licensors may wish to reserve the right to terminate immediately for the most serious of breaches.
All land is subject to planning controls that govern its use by occupiers. In general terms the controls, set by legislation (such as the Town and Country Planning Act 1990), secondary legislation (such as the Town and Country Planning (Use Classes) Order 1987) and policy documents such as local plans (for example Tottenham’s new stadium was assessed against the Local Plan for Haringey) dictate when and how land can be used. Most land is only permitted to be used for a particular purpose or purposes. A breach of planning controls can result in enforcement action being taken by the local authority, with consequences including injunctions, fines and in extreme cases, convictions.
The impact match-days have on the local area is often subject to planning controls, regulating the number of spectators permitted and the times they are permitted access to the stadium. Wray acknowledges that football clubs may be able to get away with more due to their profile and financial clout. Nevertheless, planning controls attach to the stadium and the area, not the particular event, so licensors should ensure the acts of the licensee do not breach the relevant controls.
In practice, ground sharing agreements might include a provision to the effect that the licensee covenants to comply with all planning regulations and controls, such as West Ham's covenant not to "breach the terms of the Section 106 Agreement or any Planning Condition"4 in relation to their use of the Olympic Stadium. However, there may be reason for an agreement to be even more restrictive.
The permitted uses for land are categorised within Schedule 2 of the Town and Country Planning (Use Classes) Order 1987. Stadiums are generally permitted under use class D2(e), which incorporates land being used as "a swimming bath, skating rink, gymnasium or area for other indoor or outdoor sports or recreations…". A general covenant by the Licensee to comply with planning regulations alone would permit them to use the stadium for the broad range of activities above. If the Licensor wishes to be more restrictive, a more specific user provision should be included.
Health & Safety/Liability
It is often said that a lot can happen in 90 (or 80) minutes. That can be said for incidents off the pitch as well as on it. When accidents happen at sports stadiums, clubs may find themselves liable to others in a number of ways, as history has shown.
In general terms, clubs could face claims from anyone (including participating athletes, club staff and spectators) injured whilst at the stadium and there are a number of ways to bring such a claim. The law of tort gives recourse through negligence, where the claimant has to prove a duty of care existed and was breached, causing the alleged harm. The Occupiers Liability Act 1957 also provides statutory recourse to individuals harmed whilst a visitor on premises.
In the context of ground sharing, the above concerns licensor clubs even where the licensee club is in occupation at the time of any event causing injury as under the law of negligence, they may still have owed a duty of care to the injured party and under statute, may still be defined as an occupier under the Occupiers Liability Acts.
To cover such a scenario, the ground sharing agreement should include an indemnity clause and/or a liability disclaimer. This would allow the licensor to bring a cross-claim in damages, on the terms of the contract, should they be held liable for any act or omission of the licensee whilst the latter was in occupation of the stadium. An example from the abovementioned licence between the ERP and Rugby League club reads:
[The Licensor] shall not be liable for the death of or injury to any employee or agent or invitee of the Company or for any damage to any property of the Company or any such person in connection with the exercise of [the Licence] or for any losses, claims, demands, actions, proceedings, damages, costs or expenses or other liability incurred by the Company arising out of such death, injury or damage save where it arises from the negligence of [the Licensor], a member of its group of their employees or agents.
To further reduce the risk of such incidents occurring and ensure the highest standards are in place whoever is in use of the stadium, the ground sharing agreement should also include licensee covenants to adhere to any relevant health and safety regulations or requirements. This may include general covenants to keep the ground clean and tidy and to provide or use stadium maintenance staff and medical services (see below). The Licence should also oblige the Licensee to carry out all activities in compliance with the Guide to Safety at Sports Grounds, known as "the Green Guide".
Confidentiality / Data Protection / Intellectual Property
Confidentiality issues will arise when at such close quarters with another club. Inevitably, certain information relating to a club's business operations will have to be shared during the negotiation process and subsequently during the term of the ground sharing agreement. It would be prudent and normal for both parties to demand a confidentiality clause, relating to any information disclosed or obtained by either, in connection with the licence. The clubs may also wish to query whether a non-disclosure agreement is required prior to the start of negotiations.
It is highly likely that sharing clubs will come into contact with other data, information and intellectual property of the other during the term of the ground share, either voluntarily or involuntarily; think, for example, ticketing information such as gate numbers and customer details. The use of databases such as ticketing and licencing systems, and the sharing of data may result in either party falling under the definition of a “data controller” or “data processor” for the other under the Data Protection Act 1998. This will ensure that clubs will also be required by statute to take all reasonable measures to ensure confidential data is not accidentally lost, stolen, damaged or destroyed by themselves or others.
One of the key commercial points of negotiation will be the rent or fee payable for use of the stadium. Many factors are taken into account when determining rental amounts in property transactions, including the length of the term of the agreement, the value of the property and the general balance of power in the other terms of the agreement. Surveyors are best-placed to make the valuation.
In Wray's view, the rent payable in ground sharing agreements is, for wealthy clubs, small in relation to other income streams. This is likely to be the case for most EPL clubs. Although its fortunes are improving, the ERP clearly possesses far less wealth. This financial imbalance will be a key factor at the negotiating table in a ground sharing arrangement between the sports.
As well as the amount of rent, the payment mechanisms are also important. Payments could be structured in a number of ways such as:
- A premium or lump-sum paid in advance based on the number of matches forecast in a season;
- A lump-sum with periodic payments payable within a number of days of each match-day;
- Periodic payments only; or
- Any of the above, plus contingency fees payable upon the guest club playing fixtures additional to those anticipated at the beginning of each season, such as where the club goes on a domestic or European cup run.
As ground-sharing agreements often entail the licensee only occupying the stadium on match days, some form of periodic payment would be intuitive. However, it is dependent on the parties' situations. The host club may desire a lump sum payment paid in advance, for example to fund pending improvement works at the stadium.
Development / Alterations
The ability to build and develop their stadium was for Wray one of the biggest reasons Saracens needed to own, not share. It has enabled the club to build a state of the art conference and events facility at Allianz Park, bringing in additional revenue through a hospitality business.
Developing a stadium brings to mind, most obviously, expanding seating capacity should a club experience success and an increased demand for match-day tickets. One doubts whether any licensor club would be willing to give such freedoms to a licensee, or whether a licensee would invest so significantly in a stadium in which they have no title.
A certain amount of alteration will of course be necessary, such as to transient features of the stadium like pitch-markings. However, the right to carry out minor redevelopments is not unheard of. Saracens themselves were permitted by Watford FC to build a bar in the Rous Stand at Vicarage Road. With football far more restrictive of alcohol sales on match days, in the more relaxed ERP, Saracens needed the ability to provide such a service to their fans and Watford FC obliged.
Should the clubs agree to such rights, they will need to incorporate alterations provisions in the licence and consider, among other things, whether permitted alterations may be temporary or permanent, internal or external, structural or non-structural and so on. However, if the licensor permits anything more substantial, they may wish to include a reinstatement provision, should they prefer such alterations to be undone at the end of the agreement.
An alternative would be to enter into a stand-alone licence for alterations for a particular set of works, outside of the main agreement for use.
Delivering sponsors' rights is one of a club's key commercial objectives. Stadia provide an ample canvas for the promotion of sponsor's products or services through advertising, whether through traditional pitchside hoarding or electronic displays, merchandising, or other means. For owners, this makes stadia a lucrative asset.
Licensors and licensees each have their sponsors to consider, creating an obvious conflict. Few licensors or their commercial partners will be willing to give up advertising space, particularly if the licensee's sponsors include competitor brands – think of Carling’s sponsorship of Newcastle United FC and Greene King IPA’s of the Newcastle Falcons, should the two clubs ever need to share. Clubs should consider their ability to promote their sponsors when entering a ground sharing agreement, and the impact this may have on their sponsor relationships.
Parties may be able to come to an arrangement – West Ham's concession of the Olympic Stadium grants them the right to the Stadium on a "partially clean…basis"5, meaning they have exclusive control of advertising space at their events but must return the stadium to its “clean” format after each such event. A club-owned stadium (as opposed to a genuine multi-purpose one) may not, however, afford the same luxury. Licensee clubs should consider and prepare for any liability or issues they may face under their sponsorship contracts as a consequence.
The importance of a club's own brand is also crucial, providing the club with an income stream through the sale of branded merchandise and more importantly, its identity. Wray likened ground sharing to arriving home and finding someone else's photos on your mantelpiece. This, he says, is why certain ground shares will never occur (think Liverpool/Everton, Arsenal/Tottenham, or Manchester United/City). Sharing between such historic rivals would be considered too harmful to the club brand. Even outside of such fierce rivalries, licensors may wish to limit or restrict where, when and for how long licensees can display items such as their club logo at the stadium.
Rivalries are generally confined to inter-sport examples. However, Wray raised an interesting point about considering the perception fans and people in the community have of different sports and how an intra-sport ground share may affect a club's reputation. Crowd trouble and disorder is unfortunately common among football fans, yet almost unheard of in rugby. A rugby club may wish to ask itself whether a partnership with a football club, particularly one with notorious fans, may adversely affect their brand. This is likely something to consider at the screening stage, when considering potential stadia.
Similarly, clubs should also consider the impact of stadium location. Wray speaks of geographical integrity and referred in particular to the fact that before the Ricoh Arena, Wasps had no connection to Coventry. There was little to no consultation with other local clubs like Leicester before Wasps relocated and there must have been some risk of this adversely affecting the Wasps brand. However, Wray believes it has worked out well in the end, partly because Coventry is a historic rugby city but ultimately, because of business reality. Where the ERP is concerned, until it can punch at anywhere near the same financial weight as the EPL, brand integrity will likely play second fiddle to finding suitable, affordable premises.
Wray highlighted that when sharing a ground, the Licensor owns most of the concessions and service contracts, meaning a Licensee simply cannot run any of its own initiatives with any great ease. This means, for example, services such as ticketing, catering and pouring, stewarding and security and cleaning. Not having ownership of such contracts means Licensees simply don't control their own destiny.
Like sponsors, service providers to a stadium will not want to give up or share their service contracts with the chosen providers of the licensee club. Most ground sharing agreements will therefore usually contain a provision to the effect that the Licensee covenants to use the same service providers as the Licensor and with the relevant fees paid directly from the Licensee to the provider.
As it pertains to ticketing, this likely means the Licensor will be in control of managing the sale of the Licensee's tickets. The clubs will need to set out clearly between them exactly what this entails, as the Licensee may wish to retain responsibility for any promotions, surrendering only aspects such as the sale, printing and collection of tickets to the Licensor. Clubs may also wish to consider whether they are willing and able to make any concessions to each other's sets of supporters, particularly for example where boxes are concerned.
For any services that entail making a profit, such as ticketing or catering, the clubs may wish to negotiate a percentage share of any takings or losses, or agree a fee for the provision of the services.
Ground sharing agreements will almost always take the form of a licence, or concession. As licences create no interest in land and warrant very little interference with their terms by the courts, it is absolutely essential that clubs negotiate those terms carefully to ensure they reflect the balance of interests required over the duration of the ground share.
The above has very briefly introduced some of the key elements in ground sharing agreements and clauses clubs should be looking out for when entering into such an agreement.
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- Tags: Commercial Law | Competition Act 1998 | Corporate Social Responsibility | England and Wales | Football | Health and Safety | Intellectual Property | Minimum Standards Criteria | Occupiers’ Liability Act | Office of Fair Trading | Premier League | Premier League Handbook | Rugby | Rugby Football Union (RFU) | Rugby League | Rugby Premiership | Rugby Union
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Tom is a paralegal who most recently worked in property litigation at Wedlake Bell, assisting on a broad range of matters across the department. He previously spent six months in commercial property and prior to that worked in international litigation.
He is a University College London LLM graduate.
Tom has a passion for sport (particularly tennis and American football) and the legal issues within sport.