What Does “Make Good” Mean in a Commercial Lease?

Introduction

You’ve finished your lease term and are ready to move out — but your landlord says you must “make good” the premises. What does that actually mean, and how much could it cost you?

In commercial leasing, the make good clause is one of the most misunderstood (and expensive) obligations for tenants. Here’s what business owners need to know before signing or ending a lease.

What Is a “Make Good” Clause?

A make good clause outlines how the tenant must return the premises at the end of the lease.The intention is to return the property to the condition it was in at the start of the lease — but what that means in practice varies widely between leases.

Common make good obligations include:

• Removing the tenant’s fitout or signage

• Repairing any damage caused during occupation

• Repainting walls and replacing floor coverings

• Cleaning the premises thoroughly

• Restoring original layouts or configurations

Why It Matters

Make good obligations can cost anywhere from a few thousand to tens of thousands of dollars — especially for fitted-out office or retail premises.The wording of the clause determines whether you must simply “leave the premises clean” or fully restore it to its original shell condition.

Common Types of Make Good Clauses

• Basic Make Good: - Requires tenants to return the premises in “good repair and condition, fair wear and tear excepted.” Minimal restoration, mainly cleaning and minor repairs.

• Full Reinstatement: - Requires the tenant to remove all fitout and return the premises to “base building condition.”Usually the most expensive type, often including repainting, re-carpeting, and repairs.

• Payment in Lieu: Some leases allow the tenant to pay a negotiated amount instead of physically reinstating the premises.

Key Tips for Tenants

Inspect and Document the Premises at the Start

Take detailed photos and notes of the premises’ condition before you move in. This record can be critical later if there’s disagreement about what “original condition” means.

Clarify the Make Good Scope in Writing

During lease negotiation, ask for specific wording:

• What exactly must be removed?

• Who pays for repainting and flooring?

• Can the landlord request works even if they plan to refit the premises?

Negotiate for a Payment in Lieu Option

A fixed “make good payment” provides certainty and avoids last-minute disputes.

Start Planning Early

Don’t wait until the final week of your lease. Begin obtaining quotes and discussing your exit plan several months in advance.

Common Disputes

Landlords and tenants often disagree over:

• The condition of the premises at lease start and end

• Whether fitout removal is required

• The scope of repairs

• The cost of reinstatement

Having the clause reviewed and clarified by a leasing lawyer early can prevent most of these issues.

Why Legal Advice Matters

Greyson Legal can review the lease terms, assess your legal exposure, and help negotiate fair, practical outcomes — whether before signing or when exiting.

Exiting your premises or signing a new lease?

Get practical legal advice from Greyson Legal before committing to make good obligations. We’ll help you understand your rights and negotiate fair, clear terms.

📞 Call 0411 248 885 | 📧 Email mail@greysonlegal.com