‘Make good’ and retail leases
31 March, 2025
When preparing a lease for retail premises, both landlords and tenants should carefully consider the ‘make good’ provisions. These are particularly important for landlords to ensure the premises are in a usable state for the next tenant.
‘Make good’ provisions describe the obligations of the tenant at the end of a lease and typically require a tenant to return the property to the landlord in a similar condition to how it was at the start of the lease. In some cases, ‘make good’ involves a requirement for a tenant to strip back the premises to base building (or bare shell) condition and redecorate the premises (e.g. re-paint).
It is important to negotiate and be aware of any requirements before entering the lease and to document the condition of the premises at the start of the lease, such as by preparing a condition report. Sometimes leases require a quantity surveyor to be engaged to determine any make good costs.
When leases are assigned to another party, tenants will need to check the ‘make good’ requirements and may also need to obtain a new inspection report.
Retail leases often include a clause stipulating procedures for when the landlord and tenant cannot agree on the ‘make good’ costs, including how an independent certified quantity surveyor will be appointed to make a binding determination about these costs.
At the end of the lease, the tenant should allocate funds to undertake any work required to meet their ‘make good’ obligations.
If ‘make good’ isn't completed as agreed, the landlord may seek to withhold the bond or pursue the tenant for loss or damages, including rent for the time it takes to return the premises to the agreed state.
The NSW Small Business Commission offers a range of services to assist small businesses, including providing advice on retail leasing. Our low cost mediation service in particular is a beneficial way to resolve disputes between landlords and tenants as it is fast and flexible.
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