LAWS2204 Property
Leases
A lease is a proprietary interest in land; a licence is only a personal contractual permission. The legal question is almost always the same: did the grantee get a right of exclusive possession for a certain term? If yes, it is a lease however it is labelled (Radaich v Smith); if the maximum duration is uncertain it is void as a lease (Lace v Chantler). Substance prevails over form — calling an agreement a “licence” does not make it one if exclusive possession is in fact granted. The distinction matters because a lease binds third parties and can compete in a priority dispute, whereas a licence is personal only. The subject then works through the forms a lease can take, from the most formal down: a deed lease (CA s 23B), an equitable lease where there is a specifically-enforceable agreement (Walsh v Lonsdale), a short parol lease (the statutory exception for short terms, s 23D(2)), and an implied periodic tenancy (with its term and notice rules). Finally, leases carry covenants (the obligations of landlord and tenant) and the remedies for their breach.
What this chapter covers
- 01Lease vs licence — exclusive possession is the touchstone (Radaich v Smith)
- 02Certainty of duration — an uncertain maximum term is void (Lace v Chantler)
- 03Substance over form — the label does not control
- 04Lease forms: deed lease (CA s 23B) → equitable lease (Walsh v Lonsdale)
- 05Short parol lease (s 23D(2)) and the implied periodic tenancy (s 127)
- 06The position under Torrens — short-lease exception to indefeasibility
- 07Covenants of landlord and tenant; breach and remedies
Worked example: lease or licence? (a labelled 'licence')
- +1State the test. A lease needs both a right of exclusive possession (Radaich v Smith) and a certain term (Lace v Chantler); substance prevails over the label.
- +1Exclusive possession. Sami has the only key and the sole right to occupy and trade — that is a legal right of exclusive possession (“a legal right of exclusive possession is a tenancy”, Windeyer J in Radaich).
- +1Certainty of term. The term is a fixed two years — a certain maximum duration, so the certainty requirement is satisfied (Lace v Chantler).
- +1Conclude. Despite the “Licence” heading, Sami has exclusive possession for a certain term, so the agreement is a lease — a proprietary interest binding third parties — not a personal licence.
Key terms
- Lease
- A proprietary interest in land conferring a right of exclusive possession for a certain term. Because it is proprietary, it binds third parties and can compete in a priority dispute — unlike a licence, which is merely a personal contractual permission.
- Licence
- A personal contractual permission to be on land that does not confer exclusive possession. It binds only the parties to it and creates no interest in the land, so it cannot be asserted against a purchaser or compete in a priority dispute.
- Exclusive possession
- The touchstone of a lease (Radaich v Smith): a legal right to exclude others, including the grantor, from the land for the term. Where it is granted in substance, the agreement is a lease however it is labelled.
- Certainty of duration
- The requirement that a lease have a certain maximum term; an agreement for an uncertain maximum duration is void as a lease (Lace v Chantler). Periodic tenancies satisfy this because each period is itself of certain maximum length.
- Equitable lease
- A lease that fails the legal formality (no deed) but rests on a specifically-enforceable agreement, which equity treats as a lease — “equity regards as done that which ought to be done” (Walsh v Lonsdale). It is an equitable interest, and so ranks by the priority rules.
Leases FAQ
What is the difference between a lease and a licence, and how do I tell them apart?
A lease is a proprietary interest that binds third parties; a licence is only a personal permission. The decisive test is whether the grantee has a right of exclusive possession for a certain term (Radaich v Smith; Lace v Chantler). If they do, it is a lease however the document is labelled — substance prevails over form, so a paper headed “Licence” that in fact grants exclusive possession is still a lease.
Why does it matter whether something is a lease or a licence?
Because a lease is a proprietary interest: it binds third parties, survives a sale of the reversion and can compete in a priority dispute, and (within limits) is protected even against a registered proprietor under the short-lease exception. A licence is merely personal — it binds only the grantor, creates no interest in the land, and cannot be asserted against a purchaser.
What happens if the lease term is uncertain?
An agreement for a term of uncertain maximum duration is void as a lease (Lace v Chantler). Periodic tenancies escape this because each individual period (weekly, monthly, yearly) is of certain maximum length, and the statutory term and notice rules govern how the periodic tenancy runs and ends. So check that the maximum duration is ascertainable before you classify the interest as a lease.
How is a lease created if there is no deed?
Work down the forms: a legal lease normally needs a deed (CA s 23B); a short lease may fall within the parol-lease exception (s 23D(2)); and where there is a specifically-enforceable written agreement but no deed, equity treats it as an equitable lease (Walsh v Lonsdale). Failing all of those, conduct (entry and payment of rent) may give rise to an implied periodic tenancy. Each form has different priority consequences, so identify which one you are in.
Exam move
Expect “advise the tenant” problems run on the lecturer's scaffold, and rehearse it: (1) what does the client want; (2) is it a lease or a licence — exclusive possession plus certainty?; (3) which lease form — deed lease (CA s 23B) → equitable lease (Walsh v Lonsdale) → short parol lease (s 23D(2)) → implied periodic tenancy; (4) is there a breach of covenant?; (5) what is the remedy? Leases carry high exam likelihood, so weld each step to its case and NSW section. The reliable marks are in the lease/licence characterisation (lead with Radaich and exclusive possession, then certainty under Lace v Chantler) and in correctly stepping down the ladder of lease forms rather than assuming a single formal lease.
