Based on observations of commercial lease withdrawals, the post-make-good clean and fit-out removal remain the two least anticipated activities during a lease exit. Where the leased space does not require fit-out removal, a make-good obligation will still typically apply, and tenants are often caught by the scope of what remains required.
This article focuses on the language of the lease itself rather than on traditional practices or residential tenancy experience. Office removalist and strip-out services are available through the Urgent Pro network across Sydney, Melbourne, Brisbane, Perth and the Gold Coast.
What the Make-Good Clause Actually Requires
A make-good clause in a lease requires the tenant to restore the leased premises to a particular condition upon the expiry or termination of the lease. Where the condition is the result of an agreement between the landlord and tenant to permit the tenant to carry out fit-out or other alteration works, that condition is contained in the consent documentation and in the lease itself.
A court will determine the requirements of a make-good clause based on the terms of the lease. The requirement may be as minimal as removal of a fine coat of dust and minor repairs. It may, however, require the tenant to remove the entire fit-out and reinstate the premises to the condition of the building as it was adapted for occupation. It is the lease which defines the requirement.
This is different from the residential situation. In residential leases and tenancies, the applicable law prescribes a minimum requirement, and it may be that the tenant need not engage a professional cleaner at all, or that the tenant need only address normal wear and tear. In a commercial lease, the minimum requirements, if any, are determined by the terms of the lease itself.
What the Obligation Covers
The table below sets out the common levels of make-good obligation and the lease clause required to impose each one. None of these levels is automatic.
| Obligation Level | What it Requires of the Tenant | What the Lease Must State |
|---|---|---|
| Cleaning | Full commercial cleaning of all areas upon vacating the premises | Leave in a reasonably clean condition, or a general make-good clause |
| Repairing | Rectifying defective condition beyond normal wear and tear | Covenant to repair, with or without a fair wear and tear qualifier |
| Fit-Out Removal | Remove any walls, partitions, signs, fit-out and joinery | Covenant to remove, or an express requirement in the lease and/or the consent for fit-out approved by the landlord |
| HVAC and Services | Restore services and air conditioning to the condition at the commencement of the lease | Restoration covenant in the lease |
| Reinstatement of Base Building | Stripping of the whole of the premises to a bare shell condition | Lease requires base-building reinstatement, and any prior consent for the works states this obligation |
General make-good clauses do not require a tenant to remove a fit-out or effect a restoration of the base building. The requirement to remove a fit-out is normally agreed between the landlord and the tenant’s authorised representative during the approval process for the fit-out itself. The tenant’s representative may not have read the landlord’s consent for the fit-out and may be surprised to discover the removal obligation when the lease is renewed or terminated.
Fair Wear and Tear in Commercial Leases
Residential tenants in all states of Australia benefit from fair wear and tear provisions. Commercial tenants do not enjoy the same level of statutory protection.
In leases between lessors and lessees in trade or commerce, courts have in some cases implied fair wear and tear. It is, however, prudent to include this term expressly in a commercial lease, as not all landlords are open to negotiating its inclusion. A covenant requiring a lessee to maintain the leased premises in a specified condition will, without a fair wear and tear carve-out, amount to a covenant to maintain the premises in a better than ordinary condition. It is advisable to read the repair and maintenance covenants in a lease to ascertain what condition the lessor is requiring the lessee to maintain the leased premises in throughout the term.
In Queensland, the Property Law Act 2023 implies certain terms into a lease where the lease itself does not deal with a point, and the parties can agree something different. Those implied terms are a fallback, not a substitute for the lease. Read your own lease, and get legal advice on make-good and end-of-lease obligations before the move.
Fixtures: What Stays and What Goes
In respect of the removal of fixtures, the terms of the lease govern. A commercial tenant may remove any fixtures installed by the tenant if the landlord has not expressly required otherwise, but this is a matter the parties should determine clearly.
Removing items at the end of a lease term without the landlord’s consent may constitute a breach of the lease.
As a general position, landlords must expressly require the tenant to remove fit-out items. Without such a provision, the landlord may be taken to have agreed that the fit-out items become part of the demised premises.
Prior to the landlord’s consent to a fit-out, the landlord and tenant should document which items, if any, become landlord’s works and which items are the tenant’s works and may be removed. The document should also identify whether removal of tenant works would require reinstatement of the underlying surfaces or structures.
The Entry Condition Report
The entry condition report is a lease document prepared by the landlord at the commencement of a lease, which outlines the condition of the premises and often includes photographs. This report may be used to assist in determining a tenant’s make-good obligations at the end of the lease.
Where a lease commencement condition report has not been prepared, a tenant may be required to perform additional work to fulfil their make-good obligations. For a tenant to be relieved of the obligation to perform make-good works, clear evidence showing what work, if any, is required should be available and accepted by the landlord.
Planning the Exit Timeline
Where the wording of the lease is unclear, consult a solicitor before completing any physical works or committing expenditure. For large leases or large-scale building works, the lead time should be a minimum of 12 months. This gives the parties time to organise quotes and obtain work approvals.
Four to six months before the lease ends, contact a builder to obtain a quote for the cost of reinstating the building’s structure. Contact other trades for quotes on reinstatement of building services: mechanical, electrical and plumbing. Contact a rubbish removal business to quote on removal of the fit-out. As a rough estimate, it costs approximately the same to remove a fit-out as it does to install it. In practice, removal often costs more.
There is a standard sequence of trades that must work through the premises before the exit is complete. Fit-out removal is the first step. Structural reinstatement by a builder follows. The last step is the commercial clean of the vacated premises. Commercial cleaning services for lease exit are available through the Urgent Pro network across all five cities.
Agreeing a Cash Settlement
It may be possible for the parties to agree to a cash-out provision in the lease, though this would need to be agreed at the time the lease is first entered into. Often, cash settlements are preferable to a tenant default where the landlord is planning to renovate or redevelop the property.
Any settlement must be evidenced by a legal document specifying what obligations are released. It is critical to obtain a release in the form required by the landlord’s solicitor. Do not rely on verbal releases or releases effected by email. Returns of bank guarantees or security deposits will be effected in accordance with the release agreement; confirm the terms of the agreement separately.
The pre-move office relocation checklist outlines the logistics of an office move, and what office removalist bookings cost in Australia covers the commercial side of the physical removal. Commercial and retail leasing rules differ by state and territory, and your state’s small business commissioner (or equivalent body) publishes guidance on make-good obligations and lease disputes. Urgent Pro’s service warranty terms apply to both the removalist and commercial cleaning components of a make-good exit.
FAQs
Is the removal of our office fit-out automatically triggered by a make-good clause?
No. The lease will specify whether the landlord is requiring removal of the fit-out as part of the make-good obligation. Review your lease and any consent documents issued when the fit-out was originally approved. If you cannot locate the relevant clause, engage a solicitor.
How does a commercial make-good compare to a residential end-of-lease clean?
In the residential situation, the lessee is entitled to repossession of the premises in a particular condition, and is not always obligated to provide a deep professional clean. A commercial lessee has only the rights granted to them in the lease. Commercial leases do not automatically provide a fair wear and tear regime, and the commercial lessee must examine the lease carefully to ascertain their obligations.
What is the appropriate lead time for make-good works?
The lead time depends on the nature of the obligations. Where obligations are limited to removing signs, repainting, and performing general cleaning, six months may be sufficient. In circumstances where obligations extend to removing a commercial fit-out and performing structural reinstatement works, one year is likely the bare minimum. Performance of reinstatement works increases both cost and the risk of dispute.
Is it possible to agree on a cash payment instead of physical works?
It may be possible for the parties to agree to a cash-out provision in the lease, though this is typically agreed at the time the lease is entered into. Cash settlements are often preferable where the landlord is planning to renovate or redevelop. Any settlement must be evidenced by a legal document specifying the reliefs granted. Do not rely on verbal releases or email. Returns of bank guarantees or security deposits will be effected in accordance with the release agreement.
What happens if we do not comply with our make-good obligations?
If make-good obligations are not met, the landlord can claim the cost of performing the required works, forfeit any security held against make-good, and potentially claim additional costs where the landlord is prevented from re-letting the premises. Disputing make-good obligations is likely to involve expert evidence from builders, surveyors and engineers. Seeking legal advice when a dispute first arises and documenting all negotiations and communications is the most effective way to protect your position.