Make good clause: How to streamline the process in a commercial office lease

April 29, 2022
Whether you are planning to relocate your business or nearing the end of your lease, don’t let things go bad because of the make good clause. Put simply, ‘making good’ involves returning your office space to an agreed condition, but it can cause major headaches. Here’s what to consider on the way in and the way out.

From new carpet, blinds, furniture and fittings to powerpoints, air conditioning and signage, when you move into a new commercial office there are many improvements you might make as part of the fitout. But what happens when you move out? 

As a tenant, unless you have negotiated otherwise, you are typically required to ‘make good’ at the end of a commercial office lease. The make good clause in your lease agreement sets out specifically how the commercial property needs to be left by the tenant at the end of the lease. 

From simply taking your property on the way out to stripping all fixtures down to an empty shell, the make good process can be simple or complex. It will often involve tasks such as taking down partitions, removing furniture, uninstalling fittings, removing branded signage, repairing damage, renewing floor coverings, repainting and more. 

It all depends on what you agreed with the landlord in your lease terms. It’s much better to negotiate the make good clause terms before you sign the agreement, but you do have options at the end of the lease too. 

Here are some factors to consider to make the process as smooth as possible and to ensure that it doesn’t cost you more time and money than necessary.

Negotiate a clear make good clause in the lease 

Even though a make good clause is commonly included in commercial leases, it can be one of the most disputed and contentious parts of a lease agreement. 

To avoid conflict down the track, before you sign on the dotted line it’s important to understand and document exactly what the landlord requires from you at the end of the lease. For example, if there is an existing fitout in the space you are looking to lease, will you be responsible for the removal of the fitout at the lease termination?

We recommend seeking legal advice when documenting the make good clause to make sure the wording of the lease agreement reflects the intentions of both parties and isn’t open to misinterpretation. 

Sign off on a condition report

It can be hard to remember 2, 5 or 10 years down the track the original condition of the commercial premise, so a condition report before you move in and fitout your office is particularly important. 

The condition report should include photographic evidence and outline any existing damage and installations. It will need to be signed off by both the tenant and the landlord so that you make sure you are all in agreement.

Allow enough time to make good

Before proceeding with the make good, you’ll need to agree on a timeline with your landlord and make sure you are both on the same page about exactly what needs to be done. 

Even if the lease says everything should be removed, there may be some changes you have made that your landlord will see as improvements and be happy to keep. Alternatively, there may be some parts of the fitout that will be suitable for you to re-use in your new premises. 

Typically the make good must be completed before the lease expiry, so you’ll need an allowance of 4 weeks minimum for the make good process. Rather than trying to do the stripout yourself, many businesses hire a specialised office fitout company to do the work for you, as they can manage the project from start to finish. Find a company with a good reputation for delivering work on time and on budget, otherwise you could be up for additional rent if the job runs overtime.

Consider a cash settlement

As an alternative to physically making good, in some cases your landlord may be open to negotiating a cash settlement instead, allowing you to leave your office fit out as it is at the end of the lease. On rare occasions, your landlord may even decide your fit-out has actually made the office space more leasable so they may not require any additional cash payment at all. 

Cash settlements are becoming more common and it means you can walk out without spending time and money removing the fitout. Additionally, a cash settlement also means you may have no need for a lease overlap on the current and next lease. A quality fitout may mean the landlord can lease out the office space quicker and the new tenant can benefit from being able to move straight in. 

A cash settlement can be negotiated at the beginning of the lease but you need to ensure this is well documented so both parties are clear about the expectations and obligations.

Looking to fitout your Sydney CBD office?

If you are in the process of moving offices and need a professional fitout strategy, design and build partner, then you’re at the right place. At Vestra, we understand how important your work is to you and how critical it is to have a functional and inspiring environment. 

Our team works closely with you, collaborating and welcoming ideas at every stage of the process. With expert planners, builders, project managers and designers on hand, we have years of experience designing modern workspaces.  

Contact us and see how we can help your business create the right workspace for your team. Arrange a no-obligation consultation today.


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