Here’s something that catches a lot of Melbourne businesses completely off guard.
They’ve run a successful tenancy. They’ve looked after the space. They’re excited about the new office they’re moving into. And then — sometimes just weeks before they hand back the keys — they find out exactly what their make-good obligations are.
And the number is a lot bigger than they expected.
Make-good is one of the most misunderstood parts of any commercial lease. Most tenants don’t think about it until they’re almost out the door. By that point, the timeline is tight, the options are limited, and the costs are harder to manage.
This guide changes that. Whether you’re about to sign a new lease, you’re mid-tenancy, or you’re already approaching the end of your term — read this before you do anything else. It could save you a significant amount of money and a whole lot of stress.
What Are Make-Good Obligations?
Make-good is exactly what it sounds like. When your lease ends, you’re required to “make good” the space — to restore it to an agreed condition before you hand it back to the landlord.
That might mean stripping out the entire fitout your business installed. It might mean repairing damage, repainting walls, reinstating original services, or returning the space to the condition it was in when you first moved in. What it specifically means for your tenancy depends entirely on what your lease says.
And here’s the thing — make-good isn’t optional. It’s a legal obligation written into your commercial lease. Landlords include it because they want certainty about what they’re getting back at the end of your tenancy. They’ve leased you a space in a particular condition, and they want it returned in a particular condition so they can re-lease it to the next tenant without having to fund a full strip-out themselves.
Make-good is not the same as general cleaning or routine maintenance. It’s not about leaving the place tidy when you go. It can involve substantial construction works, trade contractors, and real money.
What Make-Good Typically Covers
Every lease is different, but make-good obligations commonly include:
Removing all fitout elements installed during your tenancy — walls, partitions, joinery, ceiling alterations, floor finishes. Repairing any damage caused by your occupation or your fitout works. Reinstating building services — electrical, plumbing, HVAC — back to their original configuration. Patching and painting all penetrations, fixings, and wall damage. Returning the space to base build, warm shell, or “as at lease commencement” condition, depending on what your lease specifies.
In some cases, make-good involves virtually nothing. In others, it’s essentially a full demolition and reinstatement job. The difference comes down to what you installed, how long you’ve been there, and what your lease actually says.
What Your Lease Actually Says — And Why You Need to Read It Carefully
Most commercial tenants sign their lease, file it away, and don’t look at it again until something goes wrong. That’s understandable — leases are long, dense documents. But the make-good clause is one section worth finding and reading carefully.
What to Look For in Your Make-Good Clause
Make-good obligations are usually found in a specific clause or schedule in your commercial lease. The language varies, but you’re looking for terms like “reinstatement,” “make good,” “restoration,” or “condition at expiry.”
Three key terms show up regularly — and the difference between them matters a lot:
“Base build condition” means stripping everything back to the raw shell of the building. No partitions, no ceiling tiles, no floor finishes, no fitout at all — just the structural slab, the core walls, and the base building services. This is the most extensive and expensive form of make-good.
“Warm shell condition” means returning the space with basic services intact — air conditioning, lighting, power — but removing all fitout works. Less extensive than base build, but still a significant scope of work.
“As at lease commencement” means returning the space to the condition it was in when you first moved in. This is the most common obligation for office tenants — and it’s also the one that causes the most disputes, because both parties need to agree on what that original condition actually looked like.
Vague lease language is where disputes are born. If your lease says “good repair and condition” without defining what that means, you and your landlord may have very different ideas about what’s required.
What Tenants Most Commonly Misunderstand
Fair wear and tear. This phrase appears in a lot of leases, and a lot of tenants misread it. Fair wear and tear means the gradual, normal deterioration of a space through reasonable everyday use — slight scuffing on walls, minor carpet wear, small marks that accumulate over years of normal occupation. It does not cover holes in walls from fitout fixings, damaged flooring from heavy equipment, or any modification you’ve made to the space. Knowing the difference matters.
Who installed what. If your landlord fitted out part of the space before you moved in, those elements are generally the landlord’s responsibility — not yours to remove. But if there’s no clear record of what was there at lease commencement, proving this at the end of a five-year tenancy can be very difficult.
Make-good vs. cash settlement. Some leases include the option for a “make-good equivalent” payment — a cash amount paid to the landlord instead of physically completing the works. This can be a good option for tenants who are short on time or whose fitout would be expensive to strip out. But the amount has to be agreed on, and it’s not always the cheaper option. More on this shortly.
When to Get Legal Advice on Your Lease
If your make-good clause is more than a few paragraphs long, uses terms you’re not sure about, or requires you to return the space to base build condition — get a commercial lawyer to review it before you sign.
The cost of a lease review is minimal compared to the cost of discovering at month eleven of a twelve-month exit that your make-good obligations are far larger than you expected.
If you’re already in a lease and approaching expiry, a lawyer can also help you understand your obligations clearly and identify any grounds for negotiation.
Types of Make-Good Obligations — Which One Applies to You?
Full Strip-Out Make-Good
This is the big one. Full strip-out means removing everything your business installed — walls, ceilings, partitions, joinery, all of it — and returning the space to its shell or base build condition.
It’s most common in spaces where the tenant installed an extensive custom fitout. The more you built, the more you remove. For a large, highly fitted out office space in Melbourne, a full strip-out make-good can cost hundreds of thousands of dollars and take weeks to complete.
If your lease requires full strip-out, you need to know this early — ideally before you’ve even installed the fitout you’ll eventually be removing.
Condition Make-Good
This is the most common type for Melbourne office tenants. You return the space to the condition it was in at lease commencement — accounting for fair wear and tear.
The critical issue here is documentation. If you have a thorough condition report from day one — photos, written descriptions, a clear record of what was there when you moved in — condition make-good is straightforward. If you don’t, it becomes a negotiation about memory and interpretation. That’s not a good position to be in.
Cash Settlement (Make-Good Equivalent)
Some landlords will accept a cash payment in lieu of make-good works. This is called a make-good equivalent, and it can be a good outcome for both parties — the landlord gets money to manage the reinstatement themselves, and the tenant avoids the disruption and logistics of running a strip-out project while also trying to move into a new office.
The payment amount is usually calculated based on the estimated cost of the physical works. Sometimes it’s higher than what you’d actually spend doing the works yourself. Sometimes it’s lower. It depends on your lease, your negotiating position, and your landlord.
Cash settlement is worth exploring — but get the numbers properly assessed before you agree to anything.
Fit out Retention
Sometimes a landlord looks at your fitout and decides they want to keep it. Maybe it suits their next tenant. Maybe it’s in great condition and the cost of removing it outweighs the benefit.
If a landlord agrees to retain your fitout, your make-good obligations are usually significantly reduced or eliminated. But — and this is really important — you should never assume this is the case. Always ask. Always get it in writing. An assumption that your landlord is happy to keep the fitout has cost more than one Melbourne tenant a very expensive surprise.
The True Cost of Make-Good — What Tenants Need to Budget For
Make-good costs vary enormously. A small office with minimal fitout work might cost $10,000–$30,000 to make good. A large, extensively fitted out floor in a Melbourne CBD building could cost $200,000 or more.
Here’s what drives the cost up:
The complexity of your original fitout. The more you built, the more you need to remove and reinstate. Custom joinery, glass partitions, structural modifications, and extensive electrical works all add to make-good scope.
How long you’ve been in the space. A longer tenancy usually means more accumulated modifications, more wear, and sometimes more compliance requirements when reinstating services.
The condition of the space at expiry. Spaces left in poor condition cost more to make good than well-maintained ones.
Service reinstatement. Returning electrical, HVAC, and plumbing services to their original configuration often involves licensed trades and can be a significant cost item.
Timeline pressure. If your lease expires and you’re scrambling to get make-good works done in two weeks, you’ll pay premium rates for contractor availability. Early planning gives you access to better pricing.
Rough Cost Ranges for Melbourne Office Make-Good
These are indicative ranges only. Always get a proper assessment for your specific space:
- Small office make-good (under 200m²): $15,000 – $60,000
- Medium office make-good (200–500m²): $60,000 – $180,000
- Large office make-good (500m²+): $180,000 – $500,000+
Costs Tenants Often Don’t See Coming
Hazardous materials. If asbestos or other hazardous materials are discovered during strip-out works in an older Melbourne building, licensed removal is required before anything else can happen. This adds cost and time.
Structural repairs. Heavy fitout works sometimes cause damage to floors, walls, or ceilings that isn’t obvious until demolition starts.
Compliance upgrades. When reinstating building services, contractors sometimes discover that the existing systems no longer meet current building codes. Bringing them up to standard can become a tenant obligation depending on your lease.
Landlord contractor costs. If you fail to complete make-good works by lease expiry, many leases give the landlord the right to engage their own contractors and charge the cost back to you — usually at a much higher rate than you would have paid yourself.
The Make-Good Process — Step by Step
Step 1: Review Your Lease Early (12 Months Out Is Not Too Soon)
Twelve months before your lease expires, pull out your lease and read the make-good clause.
We know that sounds early. But starting at twelve months gives you options. You have time to get a proper assessment done. You have time to negotiate with your landlord. You have time to budget properly, plan the works, and appoint the right contractor without being rushed.
Starting at three months gives you almost no options. You’ll pay more, have less leverage in any negotiation, and run a much higher risk of not finishing on time.
At this stage, also find your original lease commencement condition report if one was prepared. This document is your single most valuable piece of protection at make-good time. If you don’t have one, talk to your landlord about what evidence exists.
Step 2: Get a Make-Good Assessment
A make-good assessment is a professional review of your space against your lease obligations — it tells you exactly what work needs to be done, what it’s likely to cost, and how long it will take.
Assessments are typically carried out by an experienced commercial fitout contractor, a project manager, or a quantity surveyor. They’ll walk through your space, review your lease, and produce a scope of works and cost estimate.
This assessment does two things. It gives you a clear budget to plan against. And it gives you a solid basis for any negotiation with your landlord about the scope or a potential cash settlement.
Step 3: Negotiate With Your Landlord Where Possible
Landlords are often more open to negotiation than tenants expect — particularly if you start the conversation early and approach it professionally.
Common negotiation outcomes include an agreed cash settlement in lieu of works, the landlord agreeing to retain parts of the fitout, a reduced scope based on their plans for the space, or an extended timeline to complete the works. None of these are guaranteed, but all of them are possible if you start the conversation at the right time and come prepared with proper cost information.
Get everything agreed in writing before any work starts or any money changes hands. A verbal agreement about make-good is worth nothing if there’s a dispute later.
Step 4: Appoint the Right Make-Good Contractor
Make-good work is specialist work. It’s not the same as a standard office renovation, and not every commercial fitout company has the experience to do it well.
Look for a contractor who has specifically completed make-good projects in Melbourne, who understands the standard required by commercial landlords, and who has a track record of delivering on time. Late completion of make-good is expensive — you want a contractor who takes the timeline as seriously as you do.
Get at least three quotes, and make sure each one is based on the same scope of works. Make-good quotes can vary significantly — sometimes because contractors are quoting on different things.
Step 5: Complete the Works on Time
This sounds obvious, but late completion is one of the most common and expensive make-good problems Melbourne tenants face.
If your lease expires and make-good works are still in progress, you may continue to be liable for rent — even if you’ve already moved out and into your new office. Your landlord may also have the right to bring in their own contractors to finish the job and charge you for it at whatever rate they choose.
Your contractor should give you a detailed programme at the start of the project — a week-by-week plan showing when each trade is on site and when the works will be complete. Hold them to it.
Step 6: Final Inspection and Sign-Off
When the works are done, your landlord (or their representative) will conduct a final inspection of the space.
Be present for this inspection. Bring your original condition report, your fitout documentation, and your make-good scope of works. If there are minor defects identified, have your contractor ready to address them quickly.
If there are disagreements about whether the standard of works meets the lease requirements — and this does happen — stay calm and professional. An independent assessment from a third party can help resolve disputes that can’t be resolved directly.
Most importantly, get written confirmation once your landlord is satisfied that make-good obligations have been met. Don’t assume a silent landlord is a happy one.
Why Your Fitout Decisions Today Affect Your Make-Good Costs Tomorrow
Here’s something most businesses don’t think about when they’re fitting out a new office: every decision you make at fitout stage has a make-good implication at the end of your lease.
A custom glass partition wall looks amazing. But it also has to come out when you leave. A structural modification to create a new doorway is useful while you’re there. But it has to be properly reinstated when you go. The more complex your fitout, the more complex — and expensive — your make-good will be.
This doesn’t mean you shouldn’t invest in a great fitout. It means you should make fitout decisions with eyes open to the long-term occupancy cost, not just the upfront construction cost.
A few smart habits that reduce future make-good costs:
Get landlord consent in writing for all major fitout works. If your landlord has approved a modification, it’s much harder for them to dispute your reinstatement approach later.
Use building-standard finishes and systems where possible. Reinstating a standard suspended ceiling is fast and cheap. Reinstating a complex custom ceiling system is neither.
Keep detailed records throughout your tenancy — photos of every modification, copies of every landlord approval, records of what was installed and by whom. These documents are cheap to keep and invaluable when make-good time comes.
The Condition Report — Your Most Important Protection
If there is one piece of advice in this entire article that you act on, let it be this: get a thorough condition report at the very start of your lease.
A condition report is a written and photographic record of the exact state of the space on the day you move in. Every wall, every floor, every ceiling, every service. Every scratch, every mark, every existing defect.
This document protects you from being held responsible for damage that was there before you arrived. It provides the objective benchmark against which your make-good obligations are measured. And it removes the most common source of make-good disputes — disagreement about what the space looked like at lease commencement.
If your landlord doesn’t prepare one, prepare your own. Have it witnessed and dated. Store it safely. And know exactly where it is when you need it five or seven years later.
Common Make-Good Disputes — and How to Stay Out of Them
“What Does Original Condition Actually Mean?”
This is the most common make-good dispute in commercial tenancies. The tenant thinks they’ve met the standard. The landlord disagrees.
Almost always, this dispute exists because there’s no clear condition report from lease commencement. With a good condition report, “original condition” is a factual question with a documented answer. Without one, it’s an argument.
Fair Wear and Tear Disagreements
Tenants often claim fair wear and tear on items that landlords consider damage. The line isn’t always clear.
Generally, paint scuffs and minor carpet wear from normal use are fair wear and tear. A hole in the wall where a screen was mounted, carpet damage from a heavy piece of equipment, or a damaged floor tile from a dropped item — these are not.
Document the condition of the space progressively throughout your tenancy. If damage occurs, deal with it at the time rather than leaving it to accumulate.
Who Installed What
Five years into a tenancy, memories fade. If there’s a question about whether a piece of joinery or a partition wall was there when you moved in or was installed by your team — and there’s no documentation either way — the dispute can be difficult to resolve.
Your fitout records and landlord approval correspondence are your defence here. Keep them.
Standard of Works Disputes
The landlord says the make-good works aren’t good enough. The tenant says they are.
This is where using a reputable, experienced make-good contractor makes a real difference. A contractor who knows what Melbourne commercial landlords expect, and who has a track record of delivering work that gets signed off, is far less likely to land you in this situation.
If a genuine dispute arises about the standard of works, an independent assessment from a qualified third party is usually the fastest way to resolve it.
Make-Good in Different Types of Commercial Tenancies
Office Tenancies
For most Melbourne office tenants, make-good means returning the space to the condition it was in at lease commencement — removing all fitout works, repairing damage, and reinstating services. The scope varies enormously depending on what was installed.
Retail Tenancies
Retail make-good in Victoria is governed in part by the Retail Leases Act 2003, which places some limits on what landlords can require. Shopfront and signage reinstatement, flooring, and internal fitout elements are all common items. Retail make-good can be complex — particularly for food and beverage tenants where extensive plumbing and ventilation works were installed.
Industrial and Warehouse Tenancies
Industrial make-good often involves removing mezzanine structures, racking systems, and other heavy installations. Concrete floor repairs, removal of line marking, and reinstatement of loading dock equipment can all feature in industrial make-good scopes. Structural modifications in industrial spaces can be particularly expensive to reinstate.
Ten Things Every Tenant Should Do to Protect Themselves
Get a condition report at the start of every commercial lease — written, photographic, dated, and witnessed.
Read your make-good clause before you sign the lease. Not after. Before.
Get landlord consent in writing for every major fitout modification. Keep the correspondence forever.
Photograph the space at regular intervals throughout your tenancy — annually at minimum.
Build make-good into your total occupancy cost from day one. It’s not a surprise expense if you’ve budgeted for it.
Start reviewing your make-good obligations 12 months before lease expiry. Not three.
Open a conversation with your landlord early. They’d rather negotiate than dispute.
Get a professional make-good assessment before you agree to anything with your landlord.
Use a make-good contractor with specific Melbourne commercial experience. Ask to see examples of their previous work.
Get written confirmation from your landlord when make-good obligations have been fully met.
Ready to Talk Make-Good? We Can Help.
At Progressive Corporate, we’ve been completing commercial fitouts and make-good works across Melbourne for over 27 years. We’ve seen every kind of make-good obligation — from simple patch and paint jobs to full base build reinstatements in large CBD tenancies.
If you’re approaching the end of your lease and not sure what your make-good obligations actually involve, we offer a free consultation where we’ll walk through your space, review your lease requirements, and give you an honest picture of what’s involved before you commit to anything.
No pressure. No obligation. Just straight advice from people who’ve done this hundreds of times.
The earlier you get in touch, the more options you have. So don’t wait until the landlord is chasing you — give us a call now and get ahead of it.
📞 (03) 7018 0761 📧 sales@progressiveoffice.com.au 📍 1 Forbes Close, Knoxfield VIC 3180
We’d love to help you leave your tenancy the right way — on time, on budget, and without any nasty surprises.