Leases 

A lease grants a tenant a genuine proprietary interest in land for a defined period, enforceable against the landlord and, within limits, against third parties. A licence grants only a personal permission to be on land, enforceable solely against the person who gave it. The distinction sits at the heart of this topic, because the label the parties choose does not control the outcome.

Lease versus licence: exclusive possession

The touchstone distinguishing a lease from a licence, per Radaich v Smith (1959) 101 CLR 209,¹ is exclusive possession: the right to occupy the premises to the exclusion of everyone, including the landlord, subject only to rights the landlord has expressly reserved (such as a right of entry to inspect or repair). Where an occupier has exclusive possession for a term, the arrangement is a lease regardless of what the document calls it. Where the occupier has only a personal right to use premises alongside the owner or other occupiers, without the right to exclude the owner, the arrangement is a licence, even if the document is headed "lease".

This matters because a lease, being a proprietary interest, generally survives a sale of the land by the landlord and can be registered on the Torrens register (or, for shorter terms, takes effect without registration as an exception to indefeasibility in most jurisdictions), whereas a licence binds only the parties to it and does not survive a sale to a third party who is unaware of it and has not otherwise assumed a personal obligation to honour it.

Essential requirements of a lease

A valid lease requires:

• Identifiable parties and premises — the land or part of it that is the subject of the lease must be sufficiently certain.
• Exclusive possession, as discussed above, distinguishing the tenant's interest from a mere licensee's.
• Certainty of term — the maximum duration of the lease must be ascertainable at the outset, whether it is a fixed term, a periodic tenancy (renewing by reference to the rent period, such as weekly or monthly, until validly terminated), or a tenancy at will. A term expressed by reference to an uncertain event, without any outer limit, risks being void for uncertainty at general law, although statute in some jurisdictions has modified this strict common law position for particular cases.
• Consent to the grant, on the usual principles governing the formation of any legal relationship.

Modern Australian law does not treat payment of rent as strictly essential to a lease, although rent is the overwhelmingly common commercial reality and its absence is often evidence telling against an intention to create a proprietary interest at all.

Formalities

Because a lease is an interest in land, its creation is usually subject to the same jurisdiction-specific formality requirements that apply to other dealings with land — commonly a requirement of writing for leases beyond a short exempted term (frequently three years, though the precise threshold and its statutory source vary between jurisdictions), and registration requirements for longer terms under the relevant Torrens statute. Short leases are often permitted to be created informally, including orally, reflecting their lower economic significance.

Core obligations

Subject to what the parties agree and to overriding statute, the general law implies a core set of obligations into a lease:

• The landlord must give the tenant quiet enjoyment of the premises — freedom from substantial interference with possession, whether by the landlord personally or by someone claiming through the landlord — and, depending on the type of premises and the jurisdiction, may owe further obligations as to fitness for habitation or repair.
• The tenant must pay the agreed rent, use the premises in a manner consistent with the lease (avoiding waste or damage beyond fair wear and tear), and yield up possession at the end of the term.

Residential tenancies attract substantial additional protection under state and territory tenancy legislation, which regulates matters such as bond handling, notice periods for termination, and minimum standards for the premises. These schemes differ materially between jurisdictions and should never be assumed to be uniform; a rule correct for one state's residential tenancies statute cannot be assumed to hold in another.

Applying this in a problem question

1. Look past the label the parties used and ask whether the occupier has exclusive possession of the premises.
2. If exclusive possession is absent, characterise the arrangement as a licence and consider whether it binds a third party at all.
3. If exclusive possession is present, check the remaining requirements for a valid lease, particularly certainty of term.
4. Identify whether any formality (writing, registration) was required for this term and jurisdiction, and whether it was satisfied.
5. Match the facts to the relevant obligation — quiet enjoyment, repair, rent, or yielding up possession — and consider whether jurisdiction-specific residential or retail tenancy legislation modifies the general law position.