The distinction between leases and licences has long caused confusion and consternation for landowners, particularly in the context of a municipal council’s statutory obligations under the Local Government Act 1989 and, more recently, the Retail Leases Act 2003.

The new-age phenomenon of Airbnb has created renewed cause for this issue to be considered by the courts.

In Swan v Uecker [2016], the Victorian Supreme Court recently found that a ‘licence’ granted by a landowner to AirBnB users in fact constituted a sub-lease. This decision has provided a timely reminder to landowners of the key distinguishing features between a lease and a licence, namely:

• a lease grants a tenant exclusive possession of a premises whereas a licence gives a licensee a non-exclusive contractual right to occupy the licensed area; and
• a lease gives the tenant a proprietary interest in the land which is capable of being assigned or transferred to a third party, whereas a licence does not give a licensee
• a proprietary interest in the land but a right personal to the licensee and enforceable in contract only.

When determining whether to grant a lease or licence, landowners should carefully consider the above principles.

The decision of Swan v Uecker has illustrated that - regardless of the title given to a document (i.e. a lease or a licence) - it is the nature of the rights granted to the occupant under the agreement that determine whether it is a lease or a licence.