how to fix "no free leases" issue in dhcp3?
Your dhcpd probably needs write access to the leases file.
From http://manpages.ubuntu.com/manpages/lucid/man5/dhcpd.leases.5.html:
When dhcpd is first installed, there is no lease database. However, dhcpd requires that a lease database be present before it will start. To make the initial lease database, just create an empty file called
/var/lib/dhcp3/dhcpd.leases. You can do this with:
touch /var/lib/dhcp3/dhcpd.leases
This should fix your problem.