A situation has come to our attention that may cause landlords of licensed premises some concern. We are aware of recent circumstances where a receiver appointed to a licensee company intended to surrender the company's Gaming Machine Licence and obtain the benefit of the subsequent sale of the Operating Authorities, despite the lease for the premises requiring the Gaming Machine Licence together with the Operating Authorities to be returned to the landlord on the termination of the lease. As the law currently stands, the receiver was well within his rights to take this course of action. Needless to say, the likely outcome was that the landlord would have suffered a sizeable decrease in the value of its property.

This follows on from the widely publicised case decided in the Queensland Court of Appeal where a receiver appointed to a licensee company under a mortgage debenture surrendered the licensee's Gaming Machine Licence and was subsequently permitted to sell the Operating Authorities attached to that licence, despite the provisions of the Gaming Machine Act 1991 providing that any encumbrance (such as a mortgage) over an Operating Authority is of no effect.

These two examples demonstrate a loophole in the Gaming Machine Act 1991 that has the potential to cause landlords significant loss and damage. Representations with respect to fixing this anomaly to the Queensland Office of Gaming Regulation have to date been ignored.

A landlord's position obviously depends on the terms of its lease. As we all know, different leases contain different provisions. However, it would be prudent for landlords to review their leases for licensed premises to see whether any steps can be taken now to avoid problems caused by this deficiency in the legislation.

The decision to purchase the freehold of licensed premises by any landlord is driven largely by the value of the Operating Authorities. Most landlords would require a provision in the lease that requires the Gaming Machine Licence together with the Operating Authorities to be returned to it on the expiry or sooner determination of the lease. Without the ability to take some form of effective security, landlords risk losing the ability to be able to take control back of the Operating Authorities.

In these uncertain financial times, how then can a landlord protect its interest in the Operating Authorities and prevent dealings with them where the Gaming Machine Licence and the Operating Authorities have been granted in the name of the tenant? When a tenant is in known breach of the lease how can you act immediately to prevent a receiver from surrendering the Gaming Machine Licence with the potential consequences of the landlord losing the ability to be able to take control back of the Operating Authorities?

With many licensees currently finding themselves in difficult financial positions, do not risk the possibility of a decrease in the value of your asset by not ensuring that you are aware of your rights under your lease and that you are taking all possible steps to protect your asset. We have reviewed the current lease that we recommend to our clients and we believe that there are workable mechanisms for a landlord to take pre-emptive action to protect their interests.

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