A Poker Machine Entitlement is the Right to Install and Operate a Poker Machine in a Club or Hotel.
Poker machines entitlements are extremely valuable. As such, lenders often require poker machine entitlements to be taken as security.
Can Poker Machine Entitlements be Transferred Separately From a Hotelier's Licence?
Poker machine entitlements are capable of being held and transferred.
As a general rule:
1. poker machine entitlements cannot exist separately to a hotelier's licence. If a hotelier's licence is sold, the poker machine entitlements will usually travel with the licence;
2. poker machine entitlements can be transferred separately from one hotelier's licence to another, with the approval of the Liquor Administration Board. In such cases, applicants must demonstrate to the Board that the proposed transfer is supported by each person who has a financial interest in the hotelier’s licence. A person is taken to have a financial interest if they are entitled to receive any income derived from the business carried on under the authority of the hotelier's licence or any other financial benefit or financial advantage from the carrying on of the business. Provided the parties who have a financial interest consent to the transfer of the licence, the transfer is approved by the Board.
Forfeiture of Poker Machine Entitlements
Transfers of poker machine entitlements from one location to another must be in blocks of 3 poker machine entitlements. As a general rule, for every block transferred (ie. 3 poker machine entitlements), 1 entitlement must be forfeited into a forfeiture pool maintained by the Liquor Administration Board.
Forfeiture will not be required if poker machine entitlements are transferred to a new venue within 1 kilometre of the old venue.
Problems for the Owner When Transferring Poker Machine Entitlements
The owner of a hotel premises does not automatically have a financial interest in the hotelier’s licence just by being the owner, even where that owner has the benefit of a lease that gives the owner the capacity to take control of the licence at the end of the lease term. The owner may however have a financial interest if, for example, the lease states that the owner is to receive an income/payment from the business carried on under the authority of the hotelier's licence.
What Does This Mean?
This means that a licensee can transfer poker machine entitlements without the approval or support of the owner of the hotel premises if the owner cannot demonstrate that it has a financial interest in the licence.
As an owner does not automatically have a financial interest in the licence, it is important to review covenants in leases to see if a financial interest can be established and to ultimately determine what right the licensee has to transfer entitlements without the approval of the owner.
Lenders must be careful when taking security over poker machine entitlements to ensure that the licensee cannot transfer the poker machine entitlements without the owner's approval or support. Article by Anna Comino
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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