If you’re nearing the end of a commercial lease, you may be wondering who pays for a make good. The answer usually lies in your lease agreement, but it’s a topic that often causes confusion and, at times, dispute between tenants and landlords. This is why it’s critical to ensure your make good provision is as clear as can be before signing the lease.
In this article, we’ll unpack who pays for a make good, how lease clauses work, and what you can do to prepare and avoid costly surprises. If you’ve run into trouble with your make good clause at the end of a lease, it’s not too late. Makegoods.com.au is here to help.
What is a make good clause?
A make good clause is a section of a commercial lease that outlines the tenant’s obligations to return the premises to a certain condition at the end of the lease. This is commonly referred to as the make good obligation, and it typically includes removing any fitout you’ve installed, repairing any damage, and restoring the space to its original condition, or sometimes, even to a base building standard.
Depending on the lease, these works might involve repainting walls, removing partitions, replacing flooring, or performing a full office make good strip out. It all depends on the scope of the make good provision in your lease agreement.
Who pays for a make good?
In most commercial leases, it is the tenant who pays for a make good.
This is because the lease generally requires the tenant to leave the premises in the same condition as it was handed over at the start of the lease.
The landlord can sometimes agree to waive certain obligations or accept a cash settlement in lieu of physical works. However, unless you’ve negotiated different terms, the responsibility — and cost — of complying with the make good clause sits with the tenant.
Why do tenants usually carry the make good cost?
The logic behind this arrangement is simple: the tenant has made changes to the space to suit their own needs, and the landlord wants the space returned to a re-lettable condition. Since the fitout was installed by the tenant, they’re usually required to remove it and restore the space — or compensate the landlord if they choose to keep it.
This is why it’s important to understand your make good obligation well before your lease ends, and to keep a clear record of the original condition of the property when you moved in.
Can the cost be negotiated?
Absolutely. While the default position in many leases is that the tenant pays, there’s often room for negotiation:
- At the start of the lease
You may be able to agree to a “clean and tidy” condition instead of full reinstatement.
- During lease renewal
If you’re staying in the same space under a new lease, you may be able to negotiate to waive the make good provision.
- At lease end
Some landlords may accept a payment in lieu of doing the works yourself — often referred to as a cash settlement.
In any case, it’s worth seeking legal or leasing advice, and getting expert input from a make good specialist to help assess your options.
Makegoods: Office make good experts in Sydney
If you’re in the Sydney CBD or surrounding suburbs and facing an end-of-lease situation, Makegoods is here to help. We specialise in commercial office make good and strip out projects, handling everything from inspections and cost estimates to physical works and landlord approvals.
Book a meeting with our team today.
FAQs about commercial make good costs
What happens if a tenant doesn’t fulfil their make good obligation?
If a tenant fails to meet their make good clause, the landlord may perform the works and charge the tenant — sometimes at premium rates. This can result in withheld bonds, legal disputes, or further costs, so it’s critical to act early.
Can a landlord pay for the make good?
In some negotiated lease terms, yes — particularly if the landlord wants to retain the tenant’s fitout or has a new tenant lined up who’ll take the space as-is. But in most standard leases, the tenant is responsible.
How do I know what’s required under my make good clause?
Review your lease and seek advice. The clause will outline your specific obligations, and you may also refer to the condition report at the time of lease commencement. A make good specialist can walk you through exactly what’s required.