GAMING UPDATE

Applications to the Victorian Commission for Gambling Regulation (the VCGR) for approvals to operate gaming machines at a newly established premises, or to increase gaming machines at an existing venue, are becoming increasingly complex. 

Bazzani Scully Brand has recently been involved in successful applications for obtaining approval to install:

1)             Sixty (60) gaming machines at the new Casey Towers development, a One Hundred Million Dollar ($100,000,000.00) commercial/entertainment facility to be constructed in Narre Warren; and

2)             Eighty (80) gaming machines at a new Twenty-Six Million Dollar ($26,000,000.00) hotel development (including accommodation) at Caroline Springs.

The location of premises seeking approval for gaming machines is increasingly important.  Gaming machines cannot be located in areas defined under the relevant planning scheme as a strip shopping centre.  Recent VCAT decisions have taken a conservative approach to the interpretation of the definition of a strip shopping centre.

In addition, the VCGR in a recent decision, in which this firm was not involved, refused an application to install sixty (60) gaming machines at a new hotel development in Lakeside Pakenham, in a detailed and important decision set out a number of matters the VCGR will take into account in determining whether to grant approval to operate gaming machines at a new venue.

This decision highlights the importance of carefully selecting the locality of a new gaming venue having regard to its proximity in particular, to shopping areas and residential areas.

Persons seeking to establish a new licensed premises with gaming machines, or to increase gaming machines at an existing venue, should contact Michael Scully regarding the gaming and planning issues involved in such an application.

In April this year, the Government made a very significant announcement in relation to the supply of gaming machines in Victoria post 2012.  Currently, gaming machines in Victoria are supplied to venues by Tattersall's Gaming Pty Ltd (Tattersall's) or Tabcorp Manager Pty Ltd (Tabcorp).  A venue cannot currently operate gaming machines in Victoria, unless Tattersall's and Tabcorp are prepared to supply gaming machines to the venue.

These arrangements will cease as and from the expiry of the current gaming operator licences, which in the case of Tattersall's, expire on 14 April 2012, and which in the case of Tabcorp, expire on 15 August 2012.

Under the new arrangements, the Government will allocate what will be known as "gaming machine entitlements" to approved venue operators through a bidding process.

A gaming machine entitlement will authorise the approved venue operator to possess and operate a gaming machine at a venue.

The Government to date has indicated the following:

A.            Gaming machine entitlements will be granted for ten (10) years only from 2012;

B.             Venue operators will be able to transfer Gaming Machine Entitlements to other licensed venue operators;

C.             An independent monitoring function will be established to monitor gaming machine transactions in venues;

D.            The current gaming operators, being Tattersalls and Tabcorp, will be able to apply for a hotel venue operator's licence post 2012.  The current gaming operators will not be permitted to operate an hotel gaming venue before their current gaming operator licences expire;

E.             The design and development of the competitive bidding process will take place as part of the transition and implementation phase of the new system. 

F.             The Government has indicated that further work in relation to the new arrangements will be undertaken in conjunction with key stakeholders including the Australian Hotels Association (Victoria), Clubs Victoria and RSL Victoria.  This work will take place in 2008/2009;

G.            The competitive bidding process is expected to be completed in early 2010;

H.            The Government will also work in conjunction with peak industry bodies to finalise new monitoring functions and new regulatory arrangements.  This work will start in 2008 and be concluded prior to the current gaming operator licences expiring.

There are many matters which as yet are still not resolved in relation to the new arrangements and which will be of critical importance to venues.

The Government has recently issued a Discussion Paper on gaming machines post 2012 inviting submissions in relation to a number of matters concerning the new post 2012 gaming supply arrangements.  The Government will then formulate its position in relation to the new arrangements.

The new gaming supply arrangements will have important implications in relation to a number of areas including:

1.              Negotiations for new leases or variations to existing leases, particularly in respect of:

i)               Those which involve a payment to the lessor for the grant of a new lease, an extension of tenure or variation of certain lease provisions; or

ii)             Rental provisions which will need to be carefully considered in light of the new arrangements; and

2.              Sales and purchases of existing businesses with gaming machines which will need to be carefully drafted so as to take into account, amongst other things:

i)               Any effect on the value of the businesses being sold as a result of the proposed changes; and

ii)             To allow for any changes by banks and their lending policies in the light of the proposed new arrangements.

If you have any queries in relation to the new gaming supply arrangements announced to date by the Government, please contact Michael Scully at Bazzani Scully Brand (mscully@bsblawyers.com.au).