Last updated: 19 January 2026.
Licence Agreement Before Settlement in Victoria: What Buyers & Sellers Need to Know
Have you purchased a residential or commercial property in Victoria but don’t want to wait until settlement to move in?
Or have you sold your property but aren’t ready to move out by the settlement date?
In these situations, a licence agreement before or after settlement may be an option. This guide explains what a licence agreement is, when it’s used, who pays for it, and the risks buyers and sellers in Victoria should understand before agreeing.
What Is a Licence Agreement in Victoria?
A licence agreement is a contractual arrangement between two parties — the licensor and the licensee — allowing temporary occupation or use of a property.
In property transactions, licence agreements are commonly used to:
- Allow early access before settlement (early possession), or
- Allow a vendor to remain in the property after settlement
Depending on the situation, either the purchaser or the vendor can be the licensor or licensee.
⚠️ Importantly, a licence agreement is not automatic. Both parties must agree, and neither party is obliged to enter into one. In some transactions, a licence agreement is not appropriate or too risky.
WHO PREPARES AND PAYS FOR THE LICENCE AGREEMENT?
It is strongly recommended that a qualified legal practitioner or conveyancer prepares the licence agreement to ensure both parties are protected.
In most cases:
- The party requesting the licence agreement pays for its preparation
- The other party’s lawyer will usually review the agreement before signing
Example
A purchaser is experiencing finance delays, pushing settlement back.
The vendor has not secured alternative accommodation.
Because the purchaser is contributing to the delay, they may:
- Pay for, or contribute to, the licence agreement costs
- Allow the vendor to remain in the property temporarily while paying a licence fee
Our property and conveyancing lawyers regularly act for both purchasers and vendors in drafting, reviewing, and negotiating licence agreements in Victoria.
📞 Contact our team on 03 8590 8370 for tailored advice.
LICENCE AGREEMENT OR LEASE?
A licence agreement and a lease are not the same, and confusing the two can create legal risk.
Lease
- Parties: Landlord and tenant
- Gives exclusive possession
- Governed by tenancy laws
- Long-term arrangement
Licence Agreement
- Parties: Licensor and licensee
- Grants temporary access only
- No exclusive possession
- Commonly used around property settlement
Because licence agreements do not create tenancy rights, they must be carefully drafted to avoid accidentally becoming a lease.
Common Licence Agreement Scenarios
Early Possession Before Settlement
A purchaser buys a commercial property and requests early access to begin fit-out works or business preparation before settlement.
Possession After Settlement
A vendor sells their family home but remains in the property for a short period after settlement while waiting for a rental property to become available.
Advantages and Disadvantages of a Licence Agreement
Advantages
- Flexibility for both buyers and sellers
- Reduced stress around settlement timing
- Temporary access or occupation without a lease
- Licence fees may provide income to one party
Disadvantages
- Additional legal costs
- Occupying party pays outgoings from occupation date
- Legal risk if terms are unclear or poorly drafted
Because of these risks, licence agreements should never be treated as “informal arrangements.”
What Should a Licence Agreement Include?
A well-drafted licence agreement should clearly set out:
- Names of the licensor and licensee
- Licence fee and payment terms
- Start and end dates
- Responsibility for repairs and maintenance
- Outgoings (rates, utilities, taxes)
- Access rights and restrictions
- Termination conditions
Clear terms help avoid disputes if settlement is delayed or complications arise.
Should I Enter Into a Licence Agreement?
Whether a licence agreement is suitable depends on your circumstances.
Before agreeing, consider:
- Are you the purchaser or the vendor?
- Is the arrangement before or after settlement?
- Who carries the financial and legal risk?
- Is the licence fee and duration reasonable?
- Who is responsible for drafting and costs?
Before signing any licence agreement, it’s critical to understand your legal rights and obligations.
Having an experienced Melbourne conveyancer or property lawyer review or draft the agreement can prevent costly mistakes.
📩 Get in touch with our team today to discuss whether a licence agreement is right for your situation.
