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  • 3G Pitch Build and Funding FAQ on Leasing

    Dean
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    FAQ on the Lease

    We would like to clarify a few points about the lease to cover any concerns.

    Q: Would you need a lease if the ownership of the club had changed as originally anticipated under the merger?

    A: Yes. If the ownership of the club had changed and the benefactors had put the money promised in, we would still need a lease or similar. Unless the football club directly owns the stadium we have to have a lease or a 'license to occupy' in place.

    There has been no structure discussed at any point where the club directly owns the stadium, and this is currently impossible to achieve as it can’t be transferred out of The Bury Football Club Company Limited under the Articles of Association for that company. We currently have a licence to occupy which is insufficient for funding purposes as it is very short term, lasting only a season.

    The league, having consulted with the FA, also advised us this week that a lease is preferable as it gives more security to the club. The email from the league states

    Having viewed your proposed lease agreement and sought guidance from the FA who are aware of the legal structures that form Bury FC and that a holding company owns Gigg Lane. The general opinion is a long term lease rather than a annual licence is a good move and provides longevity of security for the football club. Just for clarity, and for compliance with the FA Standardised League Rules, the lease should be agreed and signed with a copy to the League Secretary by no later than 31st March 2024.

    Q: Does a lease transfer ownership of the stadium to another company?

    No. A lease does not transfer the ownership of the stadium out of The Bury Football Club Company Limited. The freehold remains with that company. The suggestion that the stadium is being transferred to a new company is completely incorrect. We asked a law firm to confirm that this is the case for the avoidance of doubt, and that the granting of a lease does not contravene the Articles of The Bury Football Club Company Limited or its asset lock provisions. It does not. An excerpt of the response from the law firm is copied below:

    There is a distinction to be made here between the lease of the stadium and the transfer of the stadium. The granting of a lease of the stadium doesn’t constitute a transfer of the asset from The Bury Football Club Company Limited (the Company) because there will be no transfer of the freehold title (HMLR title number GM931156, according to the lease we have been provided with) which is the asset for the purposes of the relevant article. The Company will remain the proprietor of Gigg Lane Stadium. The position would be different if it was proposed that the Company would be transferring its interest in the freehold but that isn’t the case here because the grant of a lease relates to the creation of a new proprietary interest and the Company’s existing proprietary interest remains in situ. The wording in the articles does not preclude the lease of any of the Company’s assets- only the transfer. We therefore do not agree with Matthew’s assertion that this provision prevents the Company from entering into the proposed lease.

    Q: Does the club rent Gigg Lane?

    A: The society owns a controlling interest in both the stadium and the football club. They are both subsidiaries of the society, and we are required to make both a success. Internal legal agreements between subsidiaries are very common in business, and leases are used by other recipients of funding from the Community Ownership Fund. There is no rental payment under the lease, just an obligation on the football club to pay for maintenance and repairs.

    Q: What do other stakeholders think?

    The Department for Levelling Up, Housing and Communities have a charge on the ground for £1m for the 25 year term of their grant. They have reviewed the protections in place which would prevent the club as leaseholder endangering the security of the ground and are comfortable with them. They asked for two minor amendments to the lease which have been made, having agreed to it in principle.

    Bury Council have adopted the same position as the Football Foundation by requiring a long term lease to be in place prior to their funding. They have the same reasons as the FA and league, it gives greater security, and that gives greater certainty to investors. The stadium does not work without the football club playing there, as we saw from the £80k+ loss in the previous financial year. The football club continues to subsidise the stadium, a 3G pitch will help with this. Bury Council have kindly allowed us to copy their note to us below which make this very clear:

    ‘The Council is committed to working closely with the newly elected board and wider partners to discuss the progressing of plans for the transformation of the Gigg Lane stadium as a sustainable community asset.

    The Council has agreed to make a financial contribution to ensure the success of the principle of community ownership. Any plan for the Stadium should include the active use of the facility to bring benefit to the people of Bury outside of match days, this could be achieved through the provision of accessible sports facilities and the development of community facilities operating from within the stadium. 

    The delivery of this vision is not only compatible, but dependent on the issuing of a long-term lease to the football club. This will enable a football operation to be run from the Stadium, with the facilities being made available exclusively to the Club on match days, but at other times to also be operated as an active community sports facility. This was fundamental to the Council making an offer of funding to support the works needed to adapt and develop the Stadium. We also believe this is best possible way to attract additional external investment into the stadium and deliver the objectives of the Community Ownership Fund.

    It is therefore imperative that all partners work together to put a long-term lease in place for the football club, develop a community use and engagement plan, and begin the work of drawing in external funding.‘

    We hope this provides some useful clarification. The funding is 'dependent on the issuing of a long-term lease to the football club' amongst other terms which we need to agree with them.

    FAQ on Risks

    We have also been asked what are the key risks to the project and what are the mitigants. We have already undertaken an assessment of these and have copied them below.

    Key Risks

    1.       Delay in funding delays installation

    Probability: High Impact: High

    If we are unable to complete the order with the supplier by March we cannot install the pitch during the summer, will have missed the opportunity the apply to the Football Foundation for funding the following summer, and we assume we will lose the remaining £300, 000 from the Community Ownership Fund. We will also have missed the window for booking in suppliers for remediation work to the grass pitch and may struggle to complete the season as the current grass pitch is in a poor condition and requires considerable work. The requisite funds are available but there is a process to access these in time and Bury Council have no precedent for this so it is unclear. We also need to put the lease in place to access the Bury Council funding and this is awaiting a decision from DLUHC.

    Mitigation: Secure and agree funding terms from DHLUC and Bury Council by end February.

    2.       Pitch is not correctly installed and is unusable

    Probability: Medium Impact: High

    This would cause increased costs and potentially an inability to complete fixtures.

    Mitigation: We will ask the league to arrange away fixtures at the start of the season to allow more time should there be any minor delays. We have sourced an experienced supplier who can manage the whole process, rather than attempting to save cost with a higher risk supplier. The supplier has numerous reference sites, and we have spoken to Reading Football Club and Burton Albion who spoke highly of their work. They are based in Oxfordshire but have a representative local to Bury.

    3.       Pitch is not used by the community

    Probability: Low Impact: Medium

    If the pitch is used by the club but there is a lack of demand for use it will fail to meet its community objectives. With no Football Foundation funding there are no grant funding metrics we would need to adhere to but we expect Bury Council to want to see community benefit evidence for their funding.

    Mitigation: We have already researched demand for a 3G pitch in the area and it is high due to a lack of available pitches. There is a large deficit in the Bury Council area of 3G pitches based upon the Football Foundation and FA Football Facility Plan and Bury Council’s own Sports Facility Strategy. The future development of more 3G surfaces in the borough is unlikely to reduce this demand significantly and the stadium’s local status will undoubtedly give it a competitive edge over other facilities. Employing a community officer will ensure that the facilities are used by people who Bury Council wish to target for better health and may not be attracted to the stadium or football.

    4.       Income is short of expectation

    Probability: Low Impact: Low

    The revenues forecast are lower than we expect either through less usage or a need to reduce hire charges.

    Mitigation: We have already tested the rental charges and they are competitive when compared to other surfaces. We could increase costs and still attract a high level of usage. The combination of club and stadium has been trading at a profit without the new surface. We expect the community officer to create programmes that will be funded either through user ‘subs’ or through funded programmes, reducing the reliance on standard rental fees. Whilst lower revenues would reduce the ability to invest further it would not alter the financial viability of the club or stadium.  We could reduce the reliance on hourly rental fees and look to share the ground with another football club.

    5.       Pitch needs to be replaced faster than expected

    Probability: Medium Impact: Medium

    The pitch is no longer suitable for senior men’s football as it degrades faster than expected and fails league certification, or is considered unacceptable for some other reason.

    Mitigation: We have opted for a substructure which will perform better over time and be cheaper to replace when required. We will adopt a limit on usage similar to that used by the Football Foundation. We will use a sinking fund to provision for a replacement over time and aim to build this to around £320, 000. We have experience of ground-sharing which means that if critical repair work was required mid-season we could change stadium temporarily.

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