The end of a commercial lease should represent a clean break, a transition back to business as usual for the outgoing tenant. Unfortunately, the reality for many Australian businesses involves navigating a complex and often adversarial process known as the ‘make good provision’.
This contractual obligation, requiring the tenant to restore the premises to a specified state, frequently morphs into a protracted dispute. Numerous commercial landlords have been involved in claims that are disproportionate, unsupported, or simply outside the scope of the original lease agreement.
Landlords, armed with legal knowledge and an understanding of the pressure tenants face to vacate, may employ calculated tactics to inflate costs and secure a settlement far exceeding their entitlement.
However, tenants can level the playing field by understanding and anticipating these tactics, ensure compliance with their actual obligations, and avoid paying thousands of dollars too much. Proper preparation and expert guidance are the only reliable defence against these aggressive claims. At Makegoods.com.au, we’re here to help.
Book a meeting with our team today.
Understanding the landlord’s core motivation
To successfully counter a landlord’s inflated claim, you must first understand the underlying drivers behind their actions. In the case of a dispute, they are usually focused on optimising their financial position. This perspective helps demystify seemingly aggressive or unreasonable demands.
The financial incentive to overcharge
For many commercial property owners, the make good process is viewed less as a restoration obligation and more as a profit centre.
They understand that a tenant’s primary goal is to exit the premises cleanly, particularly under tight deadlines. This pressure creates an opportunity for the landlord to leverage the situation. They may issue a claim for damages or restoration costs significantly higher than the actual market rate for the work required.
This overcharge is essentially a high-stakes negotiation starter. The landlord anticipates the tenant will negotiate down, but even a reduced settlement often covers their costs and provides a financial bonus, especially if the tenant lacks the expertise to challenge the claim line by line. This clear financial incentive is the engine driving the initial, often shocking, cost estimate in any major make good dispute.
Exploiting tenant ignorance of lease clauses
Commercial leases are lengthy, complex documents filled with dense legal language. Landlords know that most tenants, while experts in their own business, are not specialists in property law or construction scope. This knowledge gap is a key vulnerability that landlords exploit, particularly concerning a make good provision dispute.
The landlord’s team, including their lawyers and property managers, are intimately familiar with the ‘yield up’ clause, the core of the make good obligation. They may interpret ambiguous phrasing in their favour, or worse, make claims that directly contradict the lease’s true intent. Tenants who fail to read or fully understand the specific requirements, exclusions, or alternative options (such as payment in lieu of works) outlined in their lease are immediately at a massive disadvantage. The landlord relies on the tenant accepting their interpretation without questioning the legal basis of every single demand.
Pre-dispute and notification tactics
The battle often begins well before any works commence, through the formal notification process. Landlords use specific administrative and timing tactics to limit the tenant’s ability to respond effectively or perform the work themselves.
The “Late or Vague” notice of claim
A proactive tenant needs adequate time to engage contractors, obtain competitive quotes, and schedule works before the lease expiry date. A common landlord tactic is to issue the formal notice of claim, often detailing the required make good works, at the last possible moment, sometimes only days or weeks before the handover deadline. This deliberate delay puts the tenant under extreme time pressure, often making it logistically impossible to carry out the required works themselves.
Compounding this is the ‘vague’ notice. Instead of providing a detailed scope of works with specific requirements, the notice might contain generalised statements, such as “restore all internal walls to original condition” or “rectify all damage”. Vague claims make it difficult for the tenant to prepare accurate, fixed-price quotes, thereby increasing uncertainty and making the landlord’s subsequent, detailed financial claim appear more credible by comparison.
Demanding access under unreasonable conditions
If a tenant indicates a preference to perform the make good works themselves, the landlord might respond by imposing unreasonable conditions on access. These conditions can include excessive insurance requirements, restricted working hours, or demands that the tenant use specific, high-cost contractors for certain tasks.
The goal of this tactic is subtle: to make the tenant’s option of carrying out the works so onerous, costly, and complex that they eventually give up and simply accept a cash settlement based on the landlord’s inflated quote. By controlling and complicating access, the landlord effectively eliminates the tenant’s most powerful tool for cost mitigation: competitive tendering and control over the scope of works.
Presenting an initial, inflated make good schedule
This is perhaps the most recognisable tactic in any make good dispute: the landlord presents a formal Schedule of Dilapidations or a Scope of Works that is dramatically over-costed. This initial document serves as an “anchor” in subsequent negotiations. The presented cost is often two or three times the actual market value of the work required.
The landlord’s team will often justify this exorbitant figure by using high-end, preferred contractors or by including a significant contingency buffer. The psychological impact on the tenant is immediate; the sheer size of the figure creates distress and panic. The goal is to set the expectation bar so high that when the landlord eventually agrees to a ‘discount’ during negotiation, the tenant feels relieved and accepts a settlement that is still far in excess of their true liability.
Valuation and scope manipulation
Once the initial notice is served, the focus shifts to the substance of the claim. Landlords are adept at manipulating the scope and valuation of the required works to boost their final claim. These tactics are often technical and require expert knowledge to uncover and refute.
Using non-market rate or in-house contractors
When a landlord presents a monetary claim in lieu of works, it should be based on the reasonable cost of engaging independent, market-rate contractors to perform the minimum necessary works as defined by the lease. A common tactic, however, is to rely heavily on quotes from contractors who have an ongoing, often exclusive, relationship with the property manager or landlord.
These relationships can lead to a lack of genuine competition, resulting in rates that are significantly above the industry standard. Furthermore, the quotes might include hidden mark-ups or administrative fees that are not the tenant’s responsibility. The landlord argues these rates are necessary for speed and familiarity with the building, but the ultimate effect is a massive, unjustified increase in the tenant’s settlement liability.
Demanding “Betterment” or “Upgrade” work
One of the most insidious tactics is the demand for “betterment” or an “upgrade”. The principle of make good is restoration, not improvement. The tenant’s liability is strictly limited to returning the premises to the condition specified in the lease, typically the condition at the start of the tenancy, subject to fair wear and tear.
A landlord may attempt to include items that constitute an upgrade, such as demanding the replacement of a functional, older air conditioning unit with a brand new, energy-efficient model; insisting on new premium carpets instead of a professional clean as specified; or requiring compliance with new building codes that were not in effect when the lease began. Challenging this make good obligation dispute requires a detailed, technical comparison between the original state of the premises and the landlord’s requested scope, a task best handled by a dedicated make good specialist.
Including items not covered by the make good clause
Landlords often include costs for items that are clearly outside the scope of the tenant’s make good liability. These may include charges for routine maintenance that the landlord should have carried out over the lease term; rectification of building defects that existed before the tenancy began; or even the cost of demolishing additions that the landlord previously gave written consent to remain.
They may also attempt to charge for the depreciation of building components, which is purely a landlord cost. By bundling these unrelated and unsupportable costs into one large claim, the landlord obscures the true, legitimate costs, betting that the tenant will simply accept a portion of the total claim without meticulous analysis of every single line item.
The “Missing Documents” strategy (lack of clear evidence)
The foundation of a legitimate make good dispute claim is evidence. This means providing clear, original documentation, such as the initial Entry Condition Report, photographs, floor plans, and maintenance logs. The landlord may, however, fail to provide clear, irrefutable evidence supporting the claimed damage or required restoration, or they may present documents of poor quality or limited detail.
By relying on the tenant’s failure to keep their own comprehensive records, the landlord attempts to shift the burden of proof. They essentially say, “We claim this damage exists; prove that it does not.” This strategy is a significant challenge when the tenant is attempting to reconcile the claim against the original lease terms, making it essential for the tenant to have their own complete set of historical records to counter the landlord’s lack of transparent documentation.
Pressure and negotiation strategies
As the lease expiry date approaches, the landlord often escalates the pressure to force a swift, favourable settlement. These tactics are primarily psychological, designed to wear the tenant down and minimise their time for considered resistance.
The deadline and urgency play
The single most effective tool for a landlord is the impending lease expiry date. They know that tenants face major logistical challenges and penalties for holding over, so they exploit this urgency. The landlord’s team might drag out the negotiation process, perhaps over several weeks, and then suddenly issue a final demand or notice only days before the deadline.
This manufactured crisis forces the tenant to make a rapid decision under duress. The tenant is effectively left with only two choices: accept the landlord’s inflated claim to secure a clean exit, or face the costs and logistical nightmare of a holdover period and a potential messy legal battle. This deadline pressure significantly erodes the tenant’s negotiating power.
Threatening to withhold the security deposit (bond)
For many tenants, the security deposit or bank guarantee (bond) represents a substantial amount of capital, often tens of thousands of dollars. The landlord frequently uses the bond as leverage by implying or outright stating that they will draw down on the full amount of the deposit to cover their initial, inflated claim.
This threat is particularly potent because recovering the bond involves a lengthy legal process and financial strain for the tenant. The tenant is therefore often willing to agree to an unjust cash settlement simply to ensure the quick return of the remainder of their deposit, thereby capitulating to the landlord’s demands and conceding a large part of the make good dispute funds.
The “Take It or Leave It” settlement offer
In the final stages of negotiation, the landlord may present a definitive, non-negotiable “Take It or Leave It” settlement offer. This tactic attempts to shut down genuine negotiation, leaving no room for a counter-proposal based on expert valuations.
The offer is presented as a final olive branch, often framed as a generous reduction from the original, inflated claim. While the figure may be lower than the starting point, it is frequently still far above the tenant’s actual liability. By applying this pressure, the landlord attempts to bypass the detailed, line-by-line justification that would expose the weaknesses in their original claim.
Suggesting Alternative Dispute Resolution (ADR) under duress
While formal make good dispute resolution methods, such as mediation or arbitration, are often beneficial, the landlord can manipulate the process. They may suggest immediate ADR when the tenant is least prepared or suggest a mediator or arbitrator known to favour their position.
The goal is to control the terms of the landlord and tenant dispute resolution process, forcing the tenant into a format where they feel pressured to compromise quickly. Without their own preparation and an independent expert to represent their case, the tenant is highly vulnerable in this environment, making concessions that are neither fair nor legally required.
How to proactively protect your position
The key to successfully navigating the make good process and avoiding these tactics lies in being proactive, informed, and professionally represented. Preparation is the only true defence.
Document everything: entry condition report to exit
The foundation of a tenant’s defence is documentation. You must meticulously maintain records throughout the entire tenancy. This starts with the initial Entry Condition Report, detailed photographs of the premises before occupation, and records of any subsequent modifications, alterations, or damage.
During the tenancy, keep records of all maintenance performed, all communications with the landlord, and all official consent for tenant fixtures. When the lease ends, perform your own detailed exit inspection, backed by a final set of photographs and a video walk-through. If the landlord’s claim lacks supporting evidence, your comprehensive, chronological file will be the undisputed authority on the condition of the premises.
Obtain independent expert advice (the value of a third-party make good specialist)
Landlords rely on the tenant’s lack of specialist knowledge. Neutralising this advantage requires engaging an independent, third-party make good specialist, such as those at Makegoods.com.au.
Our professionals serve several critical functions. They can interpret the technical language of the lease and its specific make good provision; they can immediately spot the common landlord tactics described above, and they are immune to the landlord’s pressure strategies.
An expert can prepare a detailed, evidence-backed counter-scope of works, supported by competitive market quotes, which fundamentally changes the nature of the make good dispute. By introducing an objective, technical perspective, the specialist moves the negotiation away from emotional pressure and back to contractual facts, which is the most effective way to secure a fair outcome.
Know your lease: focus on the “Yield Up” clause
Before any correspondence with the landlord, the tenant must thoroughly review the ‘Yield Up’ or ‘Make Good’ clause in the lease. This is the ultimate legal authority on what is required. Pay specific attention to:
- The definition of ‘original condition’.
- Whether fair wear and tear is an explicit exemption.
- Whether the landlord has the right to demand cash in lieu of works, and under what conditions.
- The exact procedures and timeframes for notices and counter-notices.
Armed with this specific knowledge, the tenant can immediately flag any landlord claim that attempts to impose “betterment” or charge for items that are clearly excluded by the contract. This knowledge is power in any potential make good dispute.
Prepare your own detailed scope and quote
Do not passively wait for the landlord’s claim. The most effective counter-tactic is to be proactive by preparing and submitting your own detailed, fixed-price scope of works and corresponding quote, based on a rigorous interpretation of the lease and true market costs.
This document serves as a powerful counter-anchor in the negotiation. It demonstrates the tenant’s seriousness, their professional approach, and their willingness to engage in the works themselves.
If the tenant can present a professionally prepared scope that meets the letter of the lease requirements for a fraction of the landlord’s initial demand, it immediately exposes the landlord’s inflated claim as baseless, turning the tables in the make good dispute.
Negotiating for a fair outcome with expert support
Successfully navigating a make good dispute is not about avoiding your contractual obligations; it is about paying only what you are genuinely obligated to pay. The key to neutralising the common, high-pressure, and manipulative landlord tactics is to replace emotion and inexperience with expertise and professional rigour.
A third-party specialist ensures that every claim is justified by the lease, every cost is validated by the market, and every negotiation is conducted without the distraction of time pressure or financial duress. By adopting a proactive, documented, and expert-led strategy, tenants can exit their premises cleanly and confidently, achieving a fair and commercially sound resolution.
Ready to take control of your commercial exit?
Don’t let an inflated claim dictate your final costs. Secure an exit strategy that is fair, compliant, and cost-effective. At Makegoods.com.au, our team has many years of experience in helping clients through their end of lease processes, ensuring they fulfil their obligations and get their bond back in full.
Book a no-obligation consultation with Makegoods.com.au today to review your lease.