There are key differences in the law between a licence and a lease, mainly revolving around exclusive possession of the premises. A lease endows this exclusive right on the tenant, where as a licence allows nonexclusive occupation.

In the case of Friendly Inn Holdings Pty Ltd v St George Bank [2012] NSWSC 127 the Supreme Court highlighted the circumstances in which a licence is appropriate. In this case, the plaintiff showed an interest in purchasing a hotel in Kangaroo Valley for $2.95 million. The defendants agreed to the sale and were under the impression it was to be settled imminently, and so allowed the plaintiff a licence to occupy the premises and start running the hotel. When it became clear the sale was not going to go through, the defendants cancelled the licence immediately and took possession of the hotel.

The plaintiff argued that he was in fact leasing the property as he was paying $12,000 in rent per month and was therefore entitled to reasonable notice of a termination. However, the court found that the agreement was in fact a short term licence that was conditional upon completing the contract for sale of the hotel. Licences are usually granted in cases like these where a more flexible arrangement is required, and therefore the notice given to the plaintiff was in fact reasonable.

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