Make Good Clauses in Australian Commercial Leases

If you’re leasing a shop, office, warehouse or studio, chances are you’ll come across a clause in the lease called a “make good” clause.

It often sounds simple: you return the premises in “good condition” at the end of the lease. But in practice, make good obligations can become one of the biggest (and most expensive) surprises in a commercial tenancy.

If you’ve been wondering what “make good” means in a commercial lease, you’re in the right place. Below, we break down what a make good clause is, why it matters, what it usually covers, and what you can do to negotiate and manage it as a practical, risk-aware small business owner.

This article is general information only and not legal advice. Lease terms (and any applicable retail leasing laws) vary between states and territories and depend on your specific lease and premises.

What Is “Make Good” In A Commercial Lease?

In a commercial lease, “make good” usually refers to your obligation (as the tenant) to restore the premises at the end of the lease term.

In plain English, a make good clause sets out what condition the premises must be returned in when you move out. This may include restoring the premises to the same condition it was in at the start of the lease, removing any fit-out you installed, repairing any damage, repainting, cleaning, and sometimes more.

The key thing to understand is that “make good” does not always mean “leave it tidy”. Depending on how your lease is written, it can mean:

• Returning the premises to “base building” or “bare shell” condition (as if you were never there),
• Returning it to the condition shown in the entry condition report, or
• Leaving your fit-out in place (but in good working order), if the landlord wants to keep it.

Because make good terms vary a lot from lease to lease, the best approach is to treat “make good” as a cost item to plan for from day one (not something you figure out after you’ve already given notice to leave).

Why Make Good Clauses Matter (And Why They Often Cause Disputes)

Make good disputes are common because the end of a lease is often a high-stress time: you’re relocating, you may be winding down the business, and the landlord is preparing to re-let the premises quickly.

From a small business perspective, make good matters because it can impact:

• Your exit costs: stripping fit-outs, repairs, trades, and waste removal can add up quickly.
• Your timing: if your make good works take longer than expected, you may pay rent longer or delay handing back the keys.
• Your bond/bank guarantee: landlords commonly claim against security if they say you haven’t complied (depending on the lease and the security terms).
• Your negotiating position: the clearer the clause, the less room there is for last-minute disagreements.

A common pain point is that tenants invest money in improvements, then at the end of the lease they’re told to remove those improvements, repaint, patch walls, repair floors, and return everything to a “base building” standard they didn’t realise applied.

This is why it’s worth treating the make good clause as a key commercial term (just like rent, outgoings and term length), and getting it reviewed before you sign.

What Does A Make Good Clause Usually Require?

Every lease is different, but most make good clauses cover a few familiar categories. The main difference is how strict the requirement is, and whether it’s tied to a condition report, the landlord’s expectations, or a “base building” standard.

1) Repairing Damage (Beyond Fair Wear And Tear)

Many leases require you to repair damage caused during your occupancy. This might include:

• holes in walls from shelving or signage,
• damage to floors or tiles,
• broken doors, locks or windows,
• damage to plumbing or electrical caused by your works.

Often, leases distinguish between damage and “fair wear and tear” (the normal deterioration that happens over time). But the definition of fair wear and tear can still be debated, especially if the premises has high foot traffic or heavy equipment.

2) Removing Your Fit-Out And Alterations

This is one of the biggest cost drivers. If you installed a fit-out (counters, partition walls, cabinetry, flooring, lighting, signage, specialty plumbing), a make good clause may require you to:

• remove it entirely,
• repair any damage caused by removal, and
• re-instate the original layout/finishes.

Some leases allow the landlord to choose whether you remove the fit-out or leave it in place. This sounds flexible, but it can create uncertainty, because you might not know the landlord’s choice until late in the process.

If your lease says you need landlord consent for alterations, make sure that consent process is clear and documented. When your lease is vague, disputes can arise about whether a particular item was “tenant’s fixture” that must be removed, or something that has become part of the premises.

3) Repainting And Reinstatement

It’s common to see clauses requiring you to repaint, often in “neutral colours” or to match the original scheme.

Even if you never repainted, the lease might still require repainting at the end of the term if there’s scuffing, branding, or noticeable deterioration. This is particularly common for retail and hospitality tenancies.

4) Cleaning And Rubbish Removal

Most make good clauses include professional cleaning and rubbish removal, which may involve:

• carpet steam cleaning,
• window cleaning,
• grease trap or exhaust cleaning (for food businesses),
• removal of stock, furniture and equipment,
• waste disposal (including fit-out debris).

Even if cleaning sounds minor, it becomes a bigger project when it is paired with reinstatement works (because dust and debris are unavoidable).

5) Restoring Services And Compliance Items

If you modified electrical, plumbing, HVAC, fire services, or other building services, you may have make good obligations to:

• ensure everything is safe and compliant,
• provide certificates or evidence of compliance, and
• restore the premises to a landlord-approved standard.

This is a good example of where “make good” is not just cosmetic. It can involve regulated items, third-party reports, and specialist contractors.

Common Make Good “Triggers” You Should Watch For In Your Lease

When small businesses get caught out, it’s often because of a single sentence in the make good clause that dramatically changes the outcome.

Here are common triggers that make make good obligations more expensive or uncertain:

• “Return to base building condition” (often means removing almost everything you’ve installed).
• “As required by the landlord” (creates discretion, which can create disputes).
• “To the landlord’s satisfaction” (a subjective standard that may be hard to prove you’ve met).
• “Repair, replace, renew” (replacement is more costly than repair).
• No reference to an entry condition report (harder to prove what “original condition” was).
• Short timeframes (e.g., requiring works within a very tight window after termination).
• Landlord can do the works and charge you (risk of inflated costs or limited control over contractors).

If you’re negotiating a lease, these phrases are often where you can reduce risk by tightening the wording or adding a practical process (for example, requiring the landlord to notify you of required works within a set timeframe).

How To Negotiate A Make Good Clause (Practical Options For Small Businesses)

You don’t always have full negotiating power-especially if you’re leasing in a competitive market-but you often have more leverage than you think, particularly if:

• you’re signing a longer term,
• you’re investing in a quality fit-out, or
• the premises is currently vacant and the landlord wants certainty.

Here are practical negotiation outcomes that can materially reduce your end-of-lease costs.

1) Tie Make Good To A Condition Report (And Attach It)

If possible, make sure the lease references an entry condition report (and ideally attaches it as an annexure). That way, make good is linked to a clear baseline rather than a vague memory of what the property looked like years earlier.

This can also help prevent disputes about whether damage existed before your lease started.

2) Agree On Whether The Fit-Out Stays Or Goes

If you’re paying for a fit-out, try to negotiate clarity around removal. Options include:

• the landlord confirms the fit-out can remain (or certain items can remain),
• the landlord must make an election within a set timeframe before the end of the lease, or
• you only have to remove fit-out items that are branded or specific to your business.

If the landlord wants the fit-out, you can sometimes negotiate that leaving it in place satisfies your make good obligations (subject to cleaning and repairs).

3) Cap Your Make Good Costs Or Limit The Scope

While not always accepted, you can try to limit make good obligations to:

• repairing damage beyond fair wear and tear,
• removing signage and branding, and
• leaving the premises “clean and tidy”.

This is particularly relevant when the premises was already in a well-used condition when you moved in, or when the landlord is likely to renovate anyway for the next tenant.

4) Build A Clear “Exit Process” Into The Lease

A practical make good clause often includes a process like:

• you notify the landlord of your intended vacate date,
• a joint inspection is held,
• the landlord provides a written list of required make good items by a set date, and
• you complete the works and provide evidence (photos, invoices, compliance certificates where relevant).

When the steps are clear, the risk of last-minute surprises drops significantly.

If you’re unsure how your make good clause will work in practice, a Commercial Lease Review is often the most cost-effective way to identify problem clauses early.

How To Manage Make Good Risk During The Lease (Not Just At The End)

Most make good problems become expensive because they’re discovered too late.

Here are a few ways to manage make good risks while you’re still in the lease, so your “exit” is smoother when the time comes.

Keep Records Of The Premises Condition And Any Works

Practical record-keeping can make a big difference if there’s a dispute later. Consider keeping:

• photos/videos from the start of the lease,
• copies of condition reports,
• emails/letters showing landlord approvals for works,
• invoices, plans, compliance certificates and warranties for installations.

This evidence can help show what existed before you took over, what changes you made, and whether your work was done properly.

Be Careful With Variations, Side Agreements And Verbal “Okays”

It’s common for leases to change during the term (new signage, new partitions, changed use, different trading hours, small renovations). If you agree to something informally, you can end up with unclear obligations later.

If something changes, documenting it through a proper variation can help. In many commercial arrangements, a Deed of Variation (or written variation process) can avoid confusion about what’s allowed and what must be removed later.

Plan Your Exit Early (Even If You’re Renewing)

Even if you think you’ll renew, it’s smart to understand your exit position well before the lease ends. This is because timing matters:

• If you need to remove fit-out, you may need time to obtain quotes and schedule trades.
• If you want to transfer the lease, the landlord may have requirements to approve the incoming tenant.
• If you’re negotiating renewal, make good can sometimes be renegotiated as part of the renewal deal.

If you’re exploring an exit pathway that involves handing the lease to another business, you’ll often need a Deed of Assignment of Lease (and a clear plan for who takes responsibility for the fit-out and the condition of the premises).

Key Takeaways

• What is “make good”? In a commercial lease, make good is usually your obligation to restore the premises to a required condition when the lease ends.
• Make good obligations can include repairs, removal of fit-out, repainting, cleaning, and reinstating services-so it’s often a major end-of-lease cost for small businesses.
• Watch for trigger phrases like “base building condition” or “to the landlord’s satisfaction”, as these can significantly expand your obligations.
• You can often negotiate make good terms upfront by tying them to a condition report, agreeing whether fit-out stays, and adding a clear exit process.
• Managing make good risk during the lease (records, written approvals, early exit planning) can reduce disputes and help protect your bond/bank guarantee.

If you’d like help reviewing or negotiating your commercial lease (including make good obligations), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.