Make Good Clauses In Commercial Leases: Meaning And How To Manage

When you’re taking on a commercial lease in Australia, the “make good” clause is one of the most important pieces of fine print to understand. It can define what you need to do-and how much you’ll spend-when you hand the premises back to your landlord at the end of your lease (or if you leave early). Handled well, make good is a manageable end-of-lease project. Handled poorly, it can derail your exit timeline and blow out your budget. In this guide, we’ll unpack how make good clauses work, what they typically require, and the practical steps to plan, negotiate and complete your obligations with confidence.

What Is A Make Good Clause?

A make good clause sets out your obligation to return the leased premises to a specified condition at the end of your tenancy. In simple terms, it’s the “return condition” promise you make when you first sign the lease. The exact requirement depends on how the clause is drafted. Common positions include:

• Return to “base building” condition (as a bare shell, before your fitout).
• Return to the “condition as at commencement” (often evidenced by a condition report and photos).
• Remove the tenant’s fixtures and fittings and repair any damage caused by that removal.
• Pay a cash settlement in lieu of physical works (by agreement with the landlord).

Because the wording can vary significantly, it’s wise to get a Commercial Lease Review before you sign, so you know exactly what you’re promising to deliver later.

What Does Make Good Usually Require?

No two leases are identical, but most make good clauses fall into patterns. Knowing the common elements helps you plan early and avoid surprises.

1) Removal Of Your Fitout

This usually includes taking out non-structural partitions, joinery, signage, reception counters, specialty lighting and cabling, security systems, and any fixtures you installed. Tip: Confirm whether the landlord wants to retain some items (for example, high-quality glazing or a kitchen). Getting this in writing can save unnecessary demolition cost.

2) Repairs And Reinstatement

After removal, you’ll typically need to “make good” any damage-patching walls, replacing damaged ceiling tiles, capping services, and making floors safe and level. Where a “base building” delivery is required, you may need to reinstate ceilings, lighting to base specification, and services back to original locations. Always check the landlord’s base building specification and design guidelines.

3) Painting And Flooring

Many leases require fresh paint in a neutral colour and replacement or professional cleaning of carpet, vinyl or other coverings. If you installed hard floors, you may be asked to remove them and reinstate carpet to the landlord’s standard.

4) Services Decommissioning

Deactivate or remove supplementary air conditioning, capped plumbing connections, data cabling back to risers, and any added electrical boards. Engage licensed trades and keep certificates of compliance-landlords often ask for these at handover.

5) Cleaning And Rubbish Removal

A final deep clean is almost always required, including removal of all trade waste and making sure the premises is clear and safe.

6) Reasonable Wear And Tear

Leases often carve out “fair wear and tear,” which means ordinary deterioration from use over time-think minor scuffs that would occur even with careful use. However, many landlords take a strict view, so it’s best to align on what “wear and tear” means for your specific premises early.

7) Security And Money Matters

Landlords commonly hold a bank guarantee or bond that they can claim against for make good costs if you don’t complete the works. Understanding how bank guarantees operate under your lease is critical, especially around expiry dates and claim procedures.

How To Plan And Budget For Make Good

End-of-lease works are more predictable-and less stressful-if you plan early. Here’s a practical roadmap.

Start 6-12 Months Before Lease End

Put a reminder in your calendar well before the lease expiry or option date. If you intend to vacate, check any notice requirements and diarise the deadline. In NSW, for example, the process can include a formal notice to vacate.

Pull Together Your Baseline Documents

• Lease and any variations (for the definitive make good wording).
• Commencement condition report and photos.
• Landlord’s base building specification and design guidelines.
• Fitout plans, services drawings and compliance certificates.

These documents help scope your obligations and avoid disputes about the “before and after.”

Get A Dilapidation Report

Engage a building consultant to do a condition inspection and photos. This snapshot helps separate your make good responsibility from pre‑existing conditions and fair wear and tear.

Scope The Works And Get Quotes

Ask experienced make good contractors to quote against your lease obligations. Ensure quotes include after-hours allowances (many buildings restrict noisy works to nights/weekends), waste removal, permits, and reinstatement to base building standards.

Coordinate Access And Approvals

Most buildings require method of work statements, permits to work, and lift bookings. If services shutdowns are needed (e.g. electrical or fire), coordinate with building management early-these bookings fill up fast.

Allow A Buffer For Unknowns

Hidden services, asbestos, or structural issues can pop up once demolition starts. Build a contingency into your budget and timeline so you’re not forced into a last‑minute cash settlement on poor terms.

Decide: Works Or Cash Settlement?

Some tenants prefer to negotiate a cash settlement instead of physically completing make good (e.g., where timing is tight or the landlord intends to refurbish anyway). If you go down this path, ask for itemised costs and compare them to independent contractor quotes.

Can You Negotiate Or Limit Make Good?

Yes-your best opportunity to reduce risk and cost is before you sign the lease. A few targeted changes can save you significantly at exit.

Negotiation Tips At Lease Entry

• Replace “return to base building” with “remove tenant’s fixtures and make good any damage.”
• Attach a commencement condition report and photos. Tie make good to that documented state.
• Exclude “fair wear and tear” and landlord‑installed items from your obligations.
• Confirm that landlord‑requested works (e.g., new shopfront) do not need to be reversed.
• Include an option for a cash settlement “acting reasonably” based on genuine quotes.

Have a lawyer review and mark up these points during negotiations-small tweaks now can remove big exit costs later. If you’re still negotiating, our team can assist with lease review and amendment advice so the clause reflects a fair, commercial position.

Negotiating At Lease End

Even at the end of the term, you can often reach a practical agreement:

• Cash settlement instead of works (with transparent costing).
• Partial make good (e.g., remove branding and specialty items, landlord retains quality partitions).
• Early access to the premises to complete works in stages.

If you’re exiting early or restructuring your tenancy, a formal Lease Surrender Agreement can document the make good position, settlement amount and release terms.

Retail Leases Considerations

Some states and territories have retail leasing legislation that sets mandatory rules around disclosure and fairness. While make good is still largely a matter of contract, landlords must comply with disclosure obligations and local requirements. In NSW, for example, the Retail Leases Act imposes specific duties that can affect negotiations and enforcement.

Ending Your Lease: Practical Steps To Get Make Good Right

When it’s time to hand back the keys, a clear process helps everything run smoothly.

1) Confirm Your Exit Date And Notices

Check your lease for notice periods for termination, end-of-term vacate, and make good completion. If you need help mapping obligations and deadlines, it’s worth seeking Lease Termination Advice early to keep your timeline on track.

2) Meet With The Landlord

Arrange a pre‑vacate inspection to align on scope. Walk the premises together with the lease in hand. If you reach a compromise (e.g., landlord keeps certain items), record it in a short variation letter or email, signed by both parties.

3) Execute The Works (Or Finalise Settlement)

Coordinate trades, building access and waste disposal. Keep records of certificates, photos and invoices. If you’ve agreed a cash settlement, confirm the amount, payment date and that it represents full and final make good.

4) Handover And Sign-Off

Do a final walkthrough with the landlord and request written confirmation that make good is complete. This can be critical evidence if there’s later a dispute over your bond or bank guarantee.

5) Security Release

Request the return of your bank guarantee or bond as per the lease. Track expiry dates-if your bank guarantee expires too soon after lease end, landlords sometimes insist on extensions until they are satisfied with make good.

Exiting Early?

If you’re considering an early exit, make good still applies unless you negotiate otherwise with the landlord. Options include assignment to a new tenant, subletting, or negotiating a surrender. Before you commit, read up on the risks of breaking a commercial lease and get advice on the best route for your business.

Common Make Good Disputes (And How To Avoid Them)

Disagreements usually arise from unclear scope, missing records, or rushed handovers. Here are the frequent flashpoints and how to manage them.

Scope: “Base Building” Vs “Condition At Start”

Fix: Tie the clause to a commencement condition report with photos. Keep all fitout drawings and approvals. Where “base building” is required, attach the base specification to the lease or obtain it from the landlord at the outset.

Wear And Tear

Fix: Align early on what is considered fair wear and tear for your tenancy (e.g., minor scuffs vs. damaged finishes). Use an independent condition report to support your position.

Quality And Standards

Fix: Clarify whether reinstatement must match brand‑new materials or comparable quality to the original. Ask for written acceptance criteria before works start to avoid rework.

Timing And Access

Fix: Get written confirmation of hours, noisy works windows, lift bookings, and any required shutdowns. Add these constraints into your contractor’s program and budget.

Cash Settlement Amounts

Fix: If a cash settlement is proposed, request itemised costing and at least two independent quotes. Aim for “acting reasonably” language in the lease to support a fair outcome.

Security Claims

Fix: If the landlord intends to draw on your security, ask for details of alleged breaches and costs. Provide your evidence of completion and quotes. Knowing your rights around bank guarantees can help you contest unreasonable claims swiftly.

Documentation Gaps

Fix: Maintain a tidy file: lease and variations, condition reports, approvals, drawings, certificates, photos (before, during and after). Good records are often the difference between a quick sign‑off and a prolonged dispute.

Should You Get Legal Help With Make Good?

If your clause is simple and your exit is straightforward, you may be comfortable coordinating make good yourself. However, you should consider legal support when:

• The clause is unclear or heavily drafted in the landlord’s favour.
• You’re negotiating a cash settlement or partial make good outcome.
• You’re exiting early and need the certainty of a documented deal (for example, under a Lease Surrender Agreement).
• There’s a dispute about scope, quality, or security.
• You’re entering a new lease and want to reduce make good risk up front.

Up‑front advice can save weeks of back‑and‑forth and help you avoid paying for works you don’t legally owe. If you’re still negotiating your lease, our lawyers can also help strengthen the make good position before you sign through a thorough Commercial Lease Review.

Key Takeaways

• A make good clause sets your end‑of‑lease obligations-typically removing your fitout, repairing damage, and returning the premises to a specified condition.
• The exact requirement depends on the wording. Clarify whether you’re returning to “base building,” the “condition at commencement,” or paying a cash settlement by agreement.
• Plan 6-12 months ahead: gather documents, get a condition inspection, scope works, obtain quotes, and coordinate building approvals and access.
• Negotiate protections at lease entry-limit make good to removal and repair, exclude fair wear and tear, and attach a condition report and base specifications.
• At exit, align scope with the landlord in writing, complete works to agreed standards, and obtain sign‑off to support the release of your bond or bank guarantee.
• If you’re exiting early or facing a dispute, consider formalising terms through Lease Termination Advice or a Lease Surrender Agreement to lock in certainty.

If you’d like tailored help negotiating or completing make good under your commercial lease, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.