What is a make-good clause in a commercial lease?

The “make-good” clause is often the most overlooked part of a commercial lease negotiation, yet it can lead to a bill of tens (or hundreds) of thousands of dollars when you decide to move out.

1. What does “Make Good” actually mean?

In its simplest form, a make-good clause is a tenant’s obligation to return the premises to the landlord in a specific condition at the end of the lease term. The exact requirements depend entirely on how the clause is drafted in your specific lease agreement.

2. Common Types of Make-Good Obligations

• Base Building Specification: This is the most onerous. It requires you to remove all fit-outs (partitions, kitchens, flooring) and return the space to a bare shell.
• Original Condition: You must return the premises to the state they were in when you first moved in (allowing for “fair wear and tear”).
• Payment in Lieu: Some leases allow the tenant to pay a lump sum to the landlord instead of physically performing the restoration work.

3. The Critical Role of the Condition Report

Without a detailed Condition Report (including high-resolution photos) signed at the start of your lease, it is your word against the landlord’s regarding what the “original condition” was. We strongly recommend our clients hire a professional building surveyor to document the state of the property before any fit-out begins.

4. How to Negotiate a Fairer Clause

• Specify Exclusions: Negotiate to leave certain improvements (like high-quality air conditioning or expensive lighting) behind if they add value to the building.
• Fair Wear and Tear: Ensure the clause explicitly excludes damage caused by reasonable usage over time.
• Limit to Fit-out Removal: Try to limit the obligation to only removing the items you installed, rather than returning the entire unit to a “bare shell.”

Related Topics

• Retail Shop Lease Protections
• Commercial Lease Early Exit
• Commercial Law Practice Area

Don’t Get Caught at the End

The best time to solve an exit dispute is before you sign the lease. We review “make-good” clauses with a focus on your long-term financial liability.

Negotiating a lease? Contact Bell & Senior for a comprehensive review of your obligations. Call (07) 5532 8777.