Make-good clauses, are when, at the end of a commercial lease, tenants are usually required to remove their fit-out and return the premises to the condition they were in at the start, sometimes to ‘base building condition’.
That can be a far more involved obligation than simply cleaning up and can cause the most expensive surprises (sometimes running into tens of thousands of dollars).
It’s important to confirm exactly what standard your lease requires. Here’s what we’ll work with you to check – whether you’re about to sign a lease or your current one is coming to an end.
1. The baseline condition
A make-good clause is only as clear as its reference point. If the lease doesn’t clearly define the condition that the premises must be returned to, with photos, schedules, or a condition report from the start of the tenancy, disputes over what’s actually required becomes far more likely.
2. Fit-out ownership and removal
Depending on how the lease is drafted, fixtures and fit-out installed during the tenancy might need to be removed, might become the landlord’s property, or might be able to stay in place by agreement. We’ll make sure this is clear well before the lease ends, not left to be negotiated in the final weeks.
3. Leaving the fit-out in place
If your fit-out suits the next likely use of the premises, a landlord may agree to waive some or all of the make-good obligation in exchange for leaving it behind. It’s worth raising this directly rather than assuming full make-good is unavoidable – and getting any agreement documented in writing.
4. Budgeting for make-good costs
For fitted-out commercial or retail premises, make-good costs can run into tens of thousands of dollars depending on the scope of works. Tenants are often caught out by this late in the lease term, when there’s little time or leverage left to negotiate it down, so it’s important to budget for it early.
5. Photographic evidence
If a dispute arises about the condition the premises need to be returned to, clear photographic evidence from the start of the tenancy, ideally referenced in the lease itself, is often the deciding factor. Without it, a dispute can come down to competing recollections.
6. For Landlords – inspect and document promptly
If you’re the landlord, inspecting the premises and documenting any make-good shortfall as soon as possible after the tenant vacates strengthens your position if you need to pursue a claim. Delays make it harder to show that condition issues are the outgoing tenant’s responsibility.
7. Negotiating at the right time
The best time to negotiate a fair make-good clause is at the start of the lease or at renewal, not at the end, when the tenant has far less bargaining power and the landlord holds most of the cards. Before signing, one of our lawyers will review the clause and flag anything that goes further than it should.
At Legali, we regularly help tenants and landlords understand exactly what’s required at the end of a commercial or retail lease. Make-good obligations feel abstract when you sign and very concrete when you’re moving out, the details matter. Reach out to our expert commercial legal team and we’ll review your lease and help you understand, and where possible reduce, your exposure before you go any further.