Australia: Reminder: Authorised Sale of Operating Authorities

Last Updated: 18 March 2009

Tony Baldwin, Partner
Darrell Jardine, Partner
Karen Brown, Associate

Tenders for the next authorised sale of operating authorities close soon so if you wish to make a bid to purchase operating authorities at the next authorised sale, your bid must be submitted by 5:00pm on 18 March 2009.

Who can purchase an operating authority?

To be entitled to purchase an operating authority at an authorised sale, you must:

  • be a Category 1 licensee; and
  • for each operating authority you wish to purchase, have an approved number of gaming machines that is more than the licensee's endorsed number of operating authorities.

How do you make a bid?

To purchase authorities in an authorised sale you must tender to purchase the number of authorities from the sale pool. You may only submit one Tender Sale Bid Form in each authorised sale of authorities, and you must only submit one Bid Price in each Tender Sale Bid Form in an authorised sale of authorities.

Submitting the bid

Your bid must be submitted in the Tender Sale Bid Form, be accompanied by the Bid Lodgement Fee, and placed into the Tender Box before 5:00pm 18 March 2009.

If my bid is successful, when must I make payment for the authorities?

If you are allocated authorities from the authorised sale pool, you must pay the amount you bid for the number of authorities allocated to you plus GST, stamp duty and the authorised sale administration fee within five working days of being advised to make the payment. If you fail to pay, your bid will be invalidated and those authorities allocated to you will then be reallocated to the next highest bidder.

Table 1 shows recent tender results in each region which includes the results of the last tender conducted on 3 December 2008, recently released by the Office of Liquor Gaming and Racing.

Table 1 – Recent tender results

Closing Date of Sale 14.11.07 12.03.08 16.07.08 03.12.08
South East
Industry 84 15 34 78
Government 20 60 1 18
Total Number Sold 104 75 35 96
Average Price 169,221 142,985 149,802 138,781
Industry 73 16 28 30
Government 28 8 15 37
Total Number Sold 101 24 43 67
Average Price 92,971 87,733 83,375 90,457
Industry 4 7 3 0
Government 0 0 0 0
Total Number Sold 4 7 3 0
Average Price 65,499 50,139 52,076 0

If you are a landlord, has your tenant approached you to 'fund' its acquisition of additional operating authorities at the next authorised sale?

Your lease of licensed premises may provide that a tenant is entitled to seek funding from you to purchase additional operating authorities at the next authorised sale. Even if your lease does not include such a provision, a tenant may still request your assistance in purchasing operating authorities at the next authorised sale. While your lease may provide that the Liquor and Gaming Machine Licences (together with all operating authorities endorsed on it) are to revert to the landlord on expiry, how can you protect your interest in the authorities and in particular where you are assisting the tenant in purchasing them?

Unfortunately, The Gaming Machine Act prevents a landlord from 'owning' operating authorities where it is not also the licensee as section 109C(1)(a) only entitles a licensee to purchase operating authorities. If a landlord decides to assist with the funding of the purchase of operating authorities by the tenant at an authorised sale, those operating authorities are endorsed on the tenant's (the licensee's) Gaming Machine Licence without any reference to the landlord's interest. Despite the provisions of a lease that may provide otherwise, a tenant could therefore dispose of those authorities or deal with those authorities without reference to the landlord. Worse still, where an administrator or receiver is appointed in respect of the tenant, the authorities may be able to be dealt with without reference to the landlord's interest in them.

Section 109H of the Gaming Machine Act prevents an operating authority from being encumbered so a landlord that has assisted financially with the purchase of the authority cannot even take any form of security over it to protect its interest.

It is therefore crucial that prior to assisting a tenant financially with the purchase of operating authorities at the next authorised sale, that the landlord thoroughly reviews the lease and seeks assistance to ensure that their interests are protected as much as possible despite the less than helpful provisions of the Gaming Machine Act. The circumstances may provide a landlord with an opportunity to amend the lease to:

  • prevent the tenant from granting any form of security over the Gaming Machine Licence;
  • where the tenant is a company, allow the landlord to be granted a charge specifically over the Gaming Machine Licence;
  • allow for an increased rental to provide the landlord with a return on the funds provided to the tenant to purchase the authorities; and
  • acknowledge that it is the spirit and intention of the parties in relation to the operating authorities that ownership and rights to them belong to the landlord, and that in the event of an amendment to the Gaming Machine Act that addresses the concerns of the landlord in relation to the disposition of operating authorities, that the lease be amended appropriately.

© HopgoodGanim Lawyers

Australia's Best Value Professional Services Firm - 2005 and 2006 BRW-St.George Client Choice Awards

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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