A new legal notice that made significant amendments and additions to the Commercialisation of Sports Facilities Regulations (S.L. 455.12) entered into force on the 29th of July 2022. The Regulations which were originally promulgated in 2017, established a framework allowing sports organisations to conduct commercial activities from their properties. The new legal notice aims to add clarity to these Regulations by inter alia addressing the following matters:
1. Defining the Activity which Sports Organisations May Engage In
The activity which sports organisations may engage in are defined as those acts which sports organisations are permitted to execute in managing their facility, whether such acts be of a purely sporting purpose or of a commercial purpose. The newly implemented amendments distinguish these acts into three categories, namely, (i) ‘sports activities’; (ii) ‘commercial activities’; and (iii) ‘sports ancillary activities’.
The amendments define ‘sports activities’ as those activities related to areas which are exclusively used for sports. These include gyms, pools, pitches and courts. On the other hand, ‘commercial activities’ include retail offices, units, shopping malls, supermarkets, and catering establishments. ‘Sports ancillary activities’ are defined as the construction and operation of buildings that have certain sporting objectives such as spectator stands and changing rooms.
2. Simplification of the Application Process
The Legal Notice has clarified that in order for a sports organisation to be able to engage in ‘commercial activities’ it must seek authorisation from the Commercial Sports Facilities Commission, or SportMalta. Where the ‘commercial activity’ exceeds a total floorspace of 200 square metres of the sports organisation’s property, the applicant must obtain authorisation from the Commercial Sports Facilities Commission. Where the ‘commercial activity’ does not exceed the 200 square metre threshold, the applicant must obtain authorisation from SportMalta. In this latter scenario, it is to be noted that the Commercial Sports Facilities Commission must still be informed of the application, since it will need to give its go-ahead to SportMalta to continue processing said application, and will ultimately appear on the public deed between the sports organization and SportMalta where the application succeeds and stands for approval by parliament.
In order for a sport organisation to file an application, it must provide the following information and documentation to the relevant body:
- the applicant’s details;
- an architect’s plan of the sports facility;
- a signed statement regarding legal counsel; and
- an explanation of the intended ‘commercial activity’.
Once an application is received, a copy of the same is submitted to the Lands Authority. The Lands Authority is then empowered to determine the freehold value of the footprint of the land over which the ‘commercial activity’ is proposed, and the emphyteutical concession’s annual ground rent to be paid by the applicant. Following this, the sports organization will be asked to provide a thorough business plan, an authenticated copy of any contract formed with a third-
party operator, and any documentation demonstrating that the parties to a development and management agreement with the organization meet the regulation’s requirements.
Upon receipt of all required documentation as stipulated hereabove, the assessing body will designate a technical committee to draft a final report. If the assessing body is satisfied with the report, it will issue a certificate authorising the sports organisation to cater for the provision of commercial activities from its property. Where the assessing body is not satisfied, it will issue a refusal, from which an appeal may be lodged.
3. Valuations Undertaken by the Lands Authority
In calculating the freehold value of the footprint of the property over which commercial activity is intended, the Lands Authority measures the difference between the land’s estimated value (including its full development potential) and the value of the improvements carried out over the years by the sports organization.
The Lands Authority determines the annual ground rent due, on the basis of pre-determined percentages included in the Regulations. The annual ground rent varies according to whether the relevant floorspace is for ‘sports activity’, ‘commercial activity’, or ‘sports ancillary activity’. As such, the ground rent for areas used for ‘sports activities’ and ‘sports ancillary activities’ is equal to 4.25% of the freehold value. On the other hand, in the case of areas used for ‘commercial activity’, the ground rent is equal to 5.75% of the freehold value.