How often do make-good clauses become a point of dispute when tenants vacate a commercial property?
In the worst cases, loosely worded make-good clauses can lead to disputes and even litigation, costing both parties time and money to resolve.
At Bromley Real Estate, we draw on nearly 50 years of experience in lease negotiation and clear communication with tenants and investors to help make the end-of-lease process as seamless as possible.
However, we continue to hear of issues in the broader market where vague lease wording or unclear expectations lead to conflict. Disputes often arise when responsibilities haven’t been properly documented or communicated.
Why are make-good clauses so important?
Most business owners want to tailor their premises to suit their operational needs, particularly when they expect to occupy a space for five, 10 or 15 years. These customisations might include new signage, removal of internal walls, flooring upgrades or bespoke joinery.
Any custom works should be agreed upon in writing before being carried out. Make-good clauses typically outline what happens to these modifications at lease end: whether they must be removed, retained, or restored.
For example, a basic make-good clause might require a tenant to remove signage, patch and paint walls, and steam-clean carpets. More extensive clauses may call for a full strip-out, including the removal of fit-outs, floor coverings, and even air-conditioning units installed by the tenant. Some leases go further, requiring the space to be returned to its original ‘shell’, regardless of its condition at the time of occupancy.
Clarity is key so everyone is on the same page.
Mitigating disputes at lease expiry
Consider a scenario that highlights the risks of vague documentation.
A physiotherapist signs a five-year lease on a suburban office. Before signing, they secure approval to install soundproof partitions, clinical-grade vinyl flooring, a built-in reception desk, and wall-mounted rehabilitation equipment. These works are commissioned on day one of the lease.
At the end of the lease, the tenant removes the equipment, patches and paints the walls, and cleans the floors, believing this meets the clause requiring the premises to be returned to “the condition it was in at the commencement of the lease, fair wear and tear excepted.”
But at final inspection, the landlord demands a full strip-out – including the partitions, flooring, and reception desk – arguing the space was delivered as a bare concrete shell. The tenant disputes this, claiming the property had already been partially fitted out by the landlord before handover.
This kind of disagreement underscores the importance of:
- Detailed and photographic entry condition reports;
- Unambiguous lease wording that outlines all property features and improvements;
- Ongoing communication between the property manager and tenant in the lead-up to lease expiry.
It all comes down to protecting the interests of both parties and ensuring the end of a lease doesn’t become the start of a dispute.