The tenant is responsible for paying for make-good work as it is a legal obligation written into the commercial lease.
The specific scope of work and the final cost depend entirely on the exact wording of the lease agreement. A few paragraphs of unclear text can lead to significant unexpected expenses.
Difference between condition and full strip-out
Condition make-good requires the tenant to return the space to its state at lease commencement, accounting for fair wear and tear. In over 35 years of delivering Melbourne office fitouts, we have seen that thorough condition reports and photos are critical to avoid disputes over memory. Full strip-out is more intensive, requiring the removal of all walls, ceilings, and joinery to restore the base build. For large Melbourne offices, these works take weeks and can cost hundreds of thousands of dollars.
Using cash settlements to avoid works
Some landlords accept a make-good equivalent, which is a cash payment in lieu of physical reinstatement. This is often a preferred outcome for tenants who are short on time or face high strip-out costs. This arrangement is usually calculated based on the estimated cost of the physical works. While it removes the disruption of managing a strip-out during a move, it is not always the cheapest option.
Financial risks of late completion
Completing works on time is critical because late handover often leads to continued rent liability. If the lease expires while works are still in progress, the tenant may pay rent for a space they have already vacated. Landlords may also exercise the right to bring in their own contractors to finish the job. These third party contractors typically charge higher rates, which increases the total cost to the tenant.
Planning with a make-good assessment
A make-good assessment is a professional review of the space against the legal obligations of the lease. This process produces a detailed scope of works and a cost estimate that provides a solid basis for negotiation. Progressive Corporate provides these assessments to ensure business owners have a clear budget and avoid surprises before the keys are handed back.
Frequently asked questions
What is a make-good assessment?
It is a professional review of the space against lease obligations to determine the work needed and the estimated cost.
Does fair wear and tear apply?
Yes, for condition make-good, the space is returned to the start of lease condition accounting for fair wear and tear.
When should I get legal advice on my lease?
A commercial lawyer should review the lease if the make-good clause is long or requires the space to be returned to base build condition.
Questions to ask your fitout company before you sign
- Will the landlord accept a make-good equivalent cash payment instead of physical works?
- What specific documentation is required to prove the condition of the space at lease commencement?
- How will the final inspection and sign-off be managed to ensure no further rent is charged?