This article has been written by @campotheclown with additional writing and editing by @simon_orourke. All of the Land Registry documents are correct as of November 5th, 2015. All documents annexed to this article are public documents which can be obtained by any person at any time for a small fee from HM Land Registry (“LR”) (the fee is £3). One of the documents can also be obtained from Companies House free of charge from the BETA element of the website page.
The Facts: Elland Road
The freehold to Elland Road (“ER”) is currently owned by Teak Commercial Limited (“TC”), a company registered in the British Virgin Islands. Jacob Adler is the designated agent for Teak Commercial Limited, confirmed by Mr. Adler to several media outlets in 2005. A copy of the freehold title register showing this is annexed at LR1. The price paid by TC was £100 short of £8m on 3rd June 2005.
The freehold title currently has an option in favour of MRH Properties Limited (company number 02632517) (“MRHP”) which was granted by Gadford Limited (company number 05183041) (“G Ltd”). The option to purchase ER legally does not rest with Leeds United Football Club Limited (company number 06233875) (“LUFC”), LUFC being the entity which is a member of the Football League and the owner of the golden share.
The option to purchase ER was granted prior to the transfer of the freehold to TC, hence why this option was granted by G Ltd and not the current landlord/ freehold owner of ER (LUFC’s landlord and the freeholder being the same entity TC).
A copy of the option is annexed to this article at LR2 and the option expires after 21 years, i.e. the last day it can be exercised is 11th November 2025, which is now less than a decade away. Given LUFC has now leased the ground for longer than the period remaining on the option, it is a worry that the option has not yet been exercised to date.
LUFC currently occupy ER under a long-term lease, a copy of the lease is annexed at LR3. There are some interesting terms within the lease, including the rent. I can confirm that the rent for the current season is £1,443,294.80, with a 2.5% increase due on 4th November 2016. The rent has increased by 2.5% for every year of the lease and will continue to increase by 2.5% for the remaining term of the lease. This is an unusual term (i.e. a fixed rent increase every year) to have in a lease, as long-term leases tend to have their rents track the open market rate of rent, rather than increasing by a fixed percentage every year. This is to allow for businesses to absorb a reduction in their revenue when a recession occurs. In LUFC’s position, that’s a 2.5% increase every year which cannot be spent on players.
Given the position LUFC were in at the time of signing the lease, it’s clear that the lease terms, as a whole, were less than favourable or could be interpreted as maximising the amount that could be taken out of LUFC for the landlord TC.
The lease term runs until 3rd November 2029, though the terms might have been altered by the insolvency proceedings that LUFC have been subject to since entering into the lease in 2004, though any variation to the term/ terms of the lease should have been registered at the LR.
As the lease is a long lease (i.e. longer than seven years), the leasehold title had to be registered at the LR, a copy of the leasehold title is annexed at LR4.
The leasehold title does have a debenture registered against it, though this has been satisfied, as confirmed by a search of Companies House, a copy of which is annexed at LR5. The fact the charge has not been removed from the LR record shows the slackness that currently exists at ER and has done for a number of years. A copy of the debenture terms negotiated by the Bates ownership is annexed at LR6 and there is nothing remarkable within the debenture itself.
What does all of the above mean to the normal fan? I will try and explain each issue in turn:
Elland Road– The most disappointing fact to fans is that LUFC do not have the legal option to purchase the stadium. Please note that the word “legal” is a very important word in this sentence. LUFC might have the beneficial interest in the option.
What’s the difference, you might ask– the best way to explain the above statement is through an example. If you were to “buy” (the technical word for this is an assignment) a lease from a tenant, then you would be the beneficial tenant the moment that the lease was “sold” from existing tenant to you as the new tenant. You do not become the legal owner until the “sale” (technically the assignment) is actually registered and the records amended at the Land Registry.
Returning to Elland Road, we can state the following:
- The option to purchase ER was initially granted to MRHP (this is a fact and shows a clear lie to all fans by the Krasner consortium at the time they sold the ground- Gerald and crew please feel free to sue but remember telling the truth is a full defence in a liable claim);
- From the LRs position the only company that’s entitled to exercise this option to purchase ER is MRHP;
- MRHP has since been dissolved and is no longer trading. The option to purchase ER might have disappeared when they were dissolved, but I find this unlikely. It’s more likely that the company was dissolved and this was “sold” to a third party, as this will have been an asset to the MRHP and would have been capable of been turned into cash for the shareholders of MRHP. You would expect that the LR would update the owner of the option, but this would require action by the owner of the option, whoever that is. It could be that LUFC has the benefit of the option, but it’s not currently clear whether this is the case or not.
You would expect that whoever has the benefit of the option to register this at the LR, unless that entity did not want it to be known that it had the benefit of the option to purchase ER.
If LUFC doesn’t have the benefit of the option then they can approach Teak Commercial like anyone else could, e.g. Leeds City Council or a property developer. You would presume that TC would sell ER to whoever offered the most for ER, like any normal property transaction.
If LUFC do have the option to purchase ER, it has long been thought that the purchase price is 11.36 x the current annual rent (i.e. the purchase price for this season could be £16,395,828.92). This is not the case, as the purchase price is based upon a formula in a lease between MRHP and G Ltd. The writer has not seen a copy of this lease and it’s therefore impossible to say what the purchase price for ER is under the option.
The fact that LUFC doesn’t have the legal option, perhaps explains why no one has ever actively sought to buy the ground back. In the times of low interests, there are several lenders who would be more than willing to lend against an asset such as ER, given the open market commercial value of the stadium. The rent currently paid by the football club is significantly more than the any mortgage payment that would be due.
I can only allow people to draw their own conclusions, though I would expect that the answer to all of the above points is money lining the pockets of several individuals.
The lease– The terms are terrible (you would never normally agree to a fixed increase every year, as recessions do happen and you’d rather your rent wasn’t increasing while your revenue was decreasing), though the lease is protected by security of tenure. In English, this means that although the lease is for a fixed term, LUFC will have the right to renew the lease when the fixed term ends. This does involve an application to Court and the presumption that the freehold owner doesn’t wish to develop the land, which if they did want to do then the lease would end at the end of the current fixed term.
The debenture– In English, a charge against all properties secured for all monies which are owed to a third party, in this case £2m to Compass Contract Services (UK) Limited. Thankfully, I am aware of what I am writing about and having checked Companies House. The charge against LUFC has been satisfied (i.e. removed from CH). The only reason this hasn’t been removed from the LR is simply due to poor knowledge of procedure by the solicitor (Chadwick Lawrence LLP) who act for LUFC. This issue is capable of being solved with a simple application to the LR, which will see the charge at the LR and the restriction removed from the leasehold title of LUFC.
I hope all of the above points are clear, but we are open to questions and will be happy to reply where clarification is required.
Annexure LR1: The Freehold
Please look at page 2, point B1 (as numbered in the title itself)- this confirms that the registered proprietor of the freeholder is TC. If you look at page 3, C5 (as numbered in the title itself)- this confirms that the option to purchase Elland Road is in favour of MRHP.
Annexure LR2: The Option
Please see the front cover page which confirms who the option to purchase Elland Road was initially made between.
Annexure LR3: The Lease
Please look at page 41 (as numbered in the lease itself) of the lease. This confirms the rent for every year under which LUFC occupy ER. The length and “Contractual Term” of the lease is defined at page 4 (as numbered in the lease itself).
Annexure LR4: The Leasehold
Please look at page 1 (as numbered in the title itself), which confirms that the lease was initially entered into between LUFC and G Ltd.
Annexure LR5: The Debenture
This is a standard worded debenture. Please feel free to ask any questions.
Annexure LR6: Debenture satisfied
This confirms that the debenture has now been removed from the records of LUFC.