Lease vs Licence: Key Differences for Short-Term Rentals
Short-term rentals have grown significantly across Australia in recent years, fuelled by platforms like Airbnb and Stayz. For property owners and tenants alike, understanding whether an arrangement is a lease or a licence is critical. While both can grant a person the right to occupy a property, they carry very different legal implications under Property & Leasing Law in Australia. Misunderstanding the difference can expose both parties to disputes, financial loss, or even legal action.
This article explores the key differences between a lease and a licence, how each applies to short-term rentals, and what property owners and renters need to consider before entering into an agreement.
What is a Lease?
A lease is a legal agreement granting exclusive possession of property for a defined period, usually in exchange for rent. Exclusive possession means the tenant has the right to exclude the landlord and others from the premises during the lease term, subject to agreed conditions.
Key characteristics of a lease include:
Exclusive possession of the property.
Fixed term (e.g. six months, one year).
Obligations for both landlord and tenant, such as repairs, rent payments, and maintenance.
Enforceable rights under state and territory tenancy laws.
For short-term rentals, a lease might apply where the arrangement is longer than a few weeks and the tenant is given exclusive control of the premises.
What is a Licence?
A licence, by contrast, grants permission to occupy or use property without creating an estate in land. It does not grant exclusive possession. Instead, it provides the licensee with the right to use the property under specific conditions, often for a short duration.
Key characteristics of a licence include:
No exclusive possession - the owner retains overall control.
Flexible terms - often short-term, informal, or casual.
Personal permission - the licence is tied to the individual and generally non-transferable.
Easier termination - the property owner can usually revoke the licence more readily than a lease.
In the context of short-term rentals, a licence often applies to Airbnb-style stays where guests occupy the property temporarily without the legal rights of a tenant.
Lease vs Licence: How to Tell the Difference
The distinction between a lease and a licence is not always clear-cut. Courts in Australia have often had to consider whether an agreement amounts to a lease or licence. The substance of the arrangement, rather than the label used, determines the legal outcome.
Indicators of a lease:
The occupant has exclusive possession.
Rent is paid for a defined term.
The arrangement resembles a landlord-tenant relationship.
Indicators of a licence:
The owner retains significant control over the property.
Occupancy is temporary and flexible.
The arrangement looks more like guest accommodation than tenancy.
For property owners and renters, the distinction matters because it determines rights, obligations, and remedies available under Property & Leasing Law.
Why the Distinction Matters for Short-Term Rentals
Legal Protections - Tenants under a lease benefit from statutory protections under residential tenancy laws, while licensees do not.
Tax and Compliance - Leasing arrangements may attract different tax consequences compared to licences, including GST and capital gains implications.
Dispute Resolution - Courts and tribunals treat lease disputes differently from licence disputes, with tenants enjoying broader remedies.
For landlords listing properties on platforms like Airbnb, incorrectly treating a lease as a licence (or vice versa) could expose them to unexpected legal obligations.
Practical Examples
Lease example: A student rents an apartment for six months with exclusive possession, paying rent monthly. This is clearly a lease.
Licence example: A traveller books a three-week stay in a holiday home via Airbnb. The owner can still access the property for maintenance, and the guest has no long-term rights. This is a licence.
Tips for Property Owners and Tenants
Check the terms carefully - Don’t rely solely on the document title; focus on the actual terms of occupancy.
Seek legal advice - A property lawyer can help clarify whether your arrangement is a lease or licence.
Be clear in agreements - Landlords should draft agreements that reflect the intended relationship and avoid ambiguous language.
Understand your rights - Tenants should know whether they’re protected under residential tenancy legislation.
The difference between a lease and a licence is crucial when dealing with short-term rentals under Australian Property & Leasing Law. While both allow occupation of property, only a lease grants exclusive possession and statutory rights. Misclassifying an arrangement can lead to disputes, unexpected costs, or loss of protection.
At New South Lawyers, our Property & Leasing Law specialists provide tailored advice to property owners, tenants, and investors. Whether you’re entering a short-term rental arrangement or drafting a leasing agreement, we ensure your legal interests are protected.
