Business transactions with gaming companies involve unique issues because gaming is highly regulated.
Gaming laws and policies affect contracts that gaming companies enter into with lenders, buyers, vendors and service providers.
Here are some issues that can arise with such leases.
■ Privileged license. A holder of a privileged gaming license is subject to the gaming laws, regulations and policies of the Nevada Gaming Control Board and the Nevada Gaming Commission. As a result, before a gaming licensee enters into a lease, it will conduct a background investigation on the tenant.
■ Termination right. Although gaming operators may offer other amenities and experiences, the most important part of a resort company’s business is gaming. To protect its ability to conduct gaming, landlords typically insist on the right to terminate a lease if the landlord’s association with the tenant could jeopardize its license or if the Nevada Gaming Control Board or Nevada Gaming Commission requires the tenant to get licensed or be found suitable and the tenant fails to do so or maintain such a status.
■ Taxes. A gaming licensee is responsible for paying live entertainment taxes, even if the live entertainment was conducted by a tenant. Bar, nightclub and showroom leases, therefore, typically contain provisions about the collection and payment of any taxes, including reporting requirements and audit rights.
■ Other regulatory restrictions. The Gaming Control Board and Gaming Commission have issued additional policy notices that a landlord might address in a lease to protect its gaming license. For example, licensees are prohibited from investing or becoming involved in a medical marijuana facility or establishment, although it is unclear whether a licensee leasing space for a medical marijuana business would constitute such involvement.
■ Complimentary programs. Often, gaming operators establish free and promotional programs to build patron loyalty and want the programs to be available throughout the establishment, including in leased space. As such, leases usually prescribe an agreement between the parties concerning promotions and point-of-sale processes. For example, the tenant might provide free food and beverage service, and the landlord would reimburse the tenant for the cost of service.
In Nevada, many businesses have leases and other ongoing contractual relationships with gaming companies. For that reason, it is critical that business owners and executives understand the gaming issues related to their transactions and strategize the best way to address them.
Angela Turriciano Otto is a shareholder and Sonia Church Vermeys is of counsel at Brownstein Hyatt Farber Schreck.