Football and Rugby Stadia
This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.
Football and rugby football league stadia are subject to co-ordination as set out in the relevant Practice Note.
The creation of the FA Premier League in 1992 has led to an increasingly polarised situation. Clubs regularly competing in the Premier League have benefited from its increased exposure and the lucrative television agreements. They have also been best placed to benefit from the increase in merchandise sales and to exploit other commercial opportunities.
Clubs relegated from the Premier League are often in a position of either having to gamble on achieving a speedy return, and therefore retaining a ‘Premier League squad’ at appropriate wages and sustaining a (hopefully) short-term loss or accepting that they must sell players to cut costs to a level more appropriate to a club outside the Premier League.
The increased players wages in the Premiership, and increased cash available from the TV deals, sees overseas footballers playing in the English leagues. This is in turn causing difficulties for those lower division clubs which have traditionally relied on incoming transfer income to remain profitable, spotting and developing young players and selling them on to the larger clubs. In some cases clubs have developed ground-sharing arrangements, for example with rugby league clubs, to maximise use of the stadium.
Trends in design of football stadia
In the 1970s and 1980s in particular, a number of disasters, mainly at football stadia, led to additional safety measures to avoid a repeat. The deaths of 66 people in a crush at an exit staircase at Ibrox Park in Scotland resulted in the Wheatley Report of 1972 which itself led to the Safety of Sports Grounds Act 1975. The Popplewell inquiry followed the Bradford City fire disaster of 1985 and the Taylor Report arose from the Hillsborough disaster of 1989.
The recommendations of the Taylor Report, which were accepted, apply to all sports grounds designated under the Safety of Sports Grounds Act 1975, in effect those capable of accommodating more than 10,000 spectators. The requirements resulting from the recommendations are that spectators are only to be admitted to seated accommodation at designated grounds, although this requirement was subject to phased timing so that all English First and Second Division Clubs and those in the Scottish Premier Division were required to have all-seater grounds by 1994, and all other designated grounds by August 1999. The latter requirement was later relaxed in respect of stadia occupied by second and third division clubs.
The result of the Taylor Report has therefore been a replacement of terracing with all-seater stands. At the same time, the larger clubs saw an opportunity to exploit additional revenue trends, and the new stands built often incorporated significant hospitality and conference facilities, executive boxes, and other catering outlets. Also, the increased demand for merchandise connected with football clubs has led to an increase in the size and quality of club shops, with some clubs also opening outlets away from the stadium itself.
The rating of football stadia has been the subject of a number of appeals before the Lands Tribunal and above. The attention of valuers is drawn to the following cases:
Hardiman (VO) v Crystal Palace Football and Athletic Club Ltd (1955) 48 R&IT 91 in which the Lands Tribunal effectively rejected the contractors test valuations presented by the parties in favour of a close scrutiny of the Club’s accounts.
West Ham United Football Club Ltd v Smith (VO) (1957) 59 R&IT 313 where the relationship between net annual value and net gate receipts was first canvassed.
Tomlinson (VO) v Plymouth Argyle Football Co Ltd and Plymouth City Council (1960) LT 51 R&IT 815, CA 53 R&IT 297 At the Lands Tribunal the VO defended a valuation based on a contractors test, whilst the ratepayers contended for an assessment based on a percentage of gate receipts. The Tribunal rejected the latter approach and adopted the contractors test of the VO, but the Court of Appeal held that the Tribunal had misdirected itself in not taking cognisance of the fact that the club was the only possible occupier of the hereditament. The Court of Appeal remarked
“here on the evidence it seems clear that the ratepayers were the only possible tenants and I can find no evidence that supports the possibility of any other. It has been argued by counsel for the VO that it would be possible that a reconstructed club could arise if the ratepayers got into inextricable difficulties, but that would still leave only one bidder, since both clubs would not be in existence simultaneously. It is of great importance that one should ascertain the exact state of the market in an unusual hereditament of this kind. The hereditament is not hypothetical and must be valued as it is rebus sic stantibus; but the landlord and the tenant are hypothetical. The Court must not assume hypothetical tenants for the hereditament if there is in respect of that particular hereditament no reasonable possibility of such tenants existing.”
The Court went on to conclude
“therefore, it was important for the Tribunal to try to decide what in the higgling of the market would be the resulting rent of this special hereditament as a result of the probable negotiations between the lessors and the ratepayers. Each had powerful bargaining arguments. The lessors needed a tenant for a valuable hereditament which demanded some thousands of pounds to be spent on it annually by way of repairs. On the other hand, the ratepayer’s existence depended on their taking the hereditament. I cannot but think that they would have arrived at some reasonable compromise and that compromise would represent the rent.”
Although this case was decided in 1960, when football operated in a very different financial and economic environment than at present, the principle set out in this decision will still hold true for the majority of clubs.
Wigan Football Club Limited v Wayne Cox (VO) [2019] UKUT 0389 (LC)
The Upper Tribunal concluded in Wigan Football Club Limited v Wayne Cox (VO) that relegation of a football club does not constitute a material change of circumstances (MCC), confirming the decision of the VTE.
In considering whether relegation was a “material” change within the meaning of para 2(7) of Schedule 6 to Local Gov Finance Act 1988. It was held that:
(1) playing in a lower league was not a separate ‘mode or category’. The UT confirmed the VTE’s statement that “football is football”. Wigan played football at the hereditament in all leagues with a view to commercial gain which dictated the valuation method.
(2) there was no change in the locality physically manifest as a consequence of relegation. The Merlin/Alton Towers decision (which was published shortly before the Wigan case went before the UT (LC) led the tribunal to conclude that the manner in which the business was operated (successfully or otherwise) could not justify altering the rateable value even if Wigan was the only possible tenant.
Bearing in mind the various decisions of the Lands Tribunal and above in the matter (see above supra), Football and Rugby League stadia generally fall to be valued on the premise that the only hypothetical tenant in the market to rent the hereditament is the actual occupying Football or Rugby club.
This in turn leads to the conclusion that “the rent at which it is estimated the hereditament might reasonably be expected to let from year to year” is in practice the rent which the club might be expected to pay at the relevant period in time.
However, the rental bid of the club is not determined solely by reference to its accounts; the motivation of a club to continue playing and thus needing to retain its ground can be properly reflected.
Details of the approach to the valuation of Football and Rugby League stadia for a particular rating list is set out in the relevant practice note.
The following paragraphs deal with problems in the assessment of Football and Rugby League stadia which may arise during the currency of a Rating List.
6.1 Change in Divisional Status
The decision in Wigan v Cox clearly dictates that promotion and relegation cannot be taken as “mentioned matters” during the life of a list as a MCC and this would include changes to costs associated with, for example, policing.
The league status and football fortunes of the club at the Antecedent Valuation Date (in April with around 8 games left in the season), should be considered against the prospects for the current season and the likelihood of income in the forthcoming season which might be affected by local derbies or international cup competitions. But assessments should not change to reflect the success or failure of any club during the life of the list.
6.2 Physical improvements
The erection of a new stand, for instance, or creation of executive boxes is a material change of circumstances which may result in the VO making an alteration to the rating list. In these circumstances the valuation must be at the AVD levels but reflecting the physical circumstances at the date of alteration. It follows that any change in receipts brought about by the new facilities should be adjusted to levels at the AVD.