In brief - Common problems are lack of precision and lack of
understanding of obligations
The major problem with make good at the end of a tenancy is the
lack of precision and understanding of the obligations of the
parties. This can be avoided by giving sufficient thought to these
arrangements and having appropriate discussions at the time of the
initial lease negotiations.
Landlords and tenants tend not to think about the end of the
The reason why make good obligations become a problem is that
people do not give these arrangements sufficient thought nor have
appropriate discussions about them at the time of lease
negotiations. What is going to happen at the end of the lease seems
to be an afterthought in discussions when a new lease is being
The reasons for this are obvious. The parties are focused on the
commercial terms of the lease, getting the deal down quickly and
having the tenant get access for fitout and occupation as soon as
possible, whilst meeting the landlord's requirements for
security under the lease.
Causes of disagreement between landlords and tenants on make
Some of the difficulties that arise with respect to what make
good is required at lease end are the following:
Lack of precision as to exactly what the make good obligations
Arguments about what comprises the tenant's property. This
comes about by virtue of who paid for the fitout (where this may be
part of the lessors' lease incentive) and items that may have
been left by a previous tenant or occupant.
The issue with respect to replacement items.
Use of general descriptors for the expected nature of the make
good, e.g. reinstating the condition that the premises were in at
the lease commencement date or "base building"
Lack of clarity as to when the make good has to be done and
what happens if the make good is incomplete at the lease end
Lease should specify precisely what the tenant needs to do at
the end of the lease
These issues can be addressed by the following:
Making sure that the lease fully sets out what the tenant's
obligations are. Do not use general expressions such as making the
premises good to the condition they were in at the commencement of
the lease or back to "base building state" without
Have an agreed conditions register (comprising
a written and/or photographic record) of the state and condition of
the premises at the commencement of the lease, signed by lessor and
Identify items to be left and to be
Clarify whether the tenant is to remove all
items, even if they are not owned by the tenant, such as
items that the landlord has paid for as part of its lease incentive
(and whether or not those items are owned by the landlord or the
tenant for depreciation purposes) or items installed by a previous
tenant which the new tenant is to have the benefit of.
Specify what the tenant is required to do with respect to
services, cabling, lighting, phone systems, security access
systems and the like.
Stipulate clearly what is to happen with items that are
left in the property and are not removed. Are they
forfeited, can the landlord assume a proprietary interest in them
by virtue of the fact that they are abandoned or can the landlord
remove them and charge the tenant?
Make it clear what the consequences are if the tenant does not
remove items and effect the clearly set out make good obligations
by the lease end date (eg rent continues to be paid until it is
done or the tenant is liable for any losses that the landlord
incurs by, for example, not being able to have a new tenant move in
until the items are removed).
Don't leave discussion of make good arrangements until the
tenant is ready to vacate
Landlords and tenants have to realise that make good obligations
are a principal and major aspect for consideration that needs to be
dealt with at the commencement of lease negotiations, rather than
leaving this discussion until the tenant is ready to vacate.
By properly addressing this matter when the lease is originally
negotiated, unpleasantness and uncertainty at the end of a lease
can be avoided.
Many retail leases include a covenant to trade, requiring the tenant to open the premises for trade during certain hours.
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