The "peer holds all free leases" message is sometimes logged when the
peer does actually hold all free leases, but it is also emitted any time
that there are "free" leases and the local server cannot allocate any of
them to the current client.

For example, if all of the leases in the current subnet are reserved for
specific clients and an unknown client requests an address.  Or if the
policy encoded in the configuration prohibits the client from obtaining
a lease on its current subnet (but might allow one on a different subnet).

The big problem with the message as it exists is that it often sends DHCP
administrators down the wrong trail when an issue is reported.