Make good for property managers and landlords: running a tenant's exit

This guide is for owners, landlords, property managers and leasing agents in Victoria and NSW running a commercial tenant's exit.

General information only, not legal advice. The lease and your own legal advice decide what you can require and recover. For retail leases, your state's Small Business Commission is a useful free starting point.

What does make good mean for a landlord?

Make good is the tenant's end-of-lease obligation to hand the premises back in the condition the lease requires. It is a contractual obligation. Victoria's Retail Leases Act 2003 does not define it, so the lease wording sets the standard. The NSW Small Business Commission describes it as returning the premises to the condition they were first built in, to the condition at the start of the lease, "or some other condition as specified in the lease".

You can only ask for what the lease supports, and the work is the tenant's job unless you agree otherwise. Your role is to define the standard, provide building rules and access, inspect, and sign off.

For the clause types, see the make-good clause explained; for the cost split, see who pays for make good.

When should a landlord start the make-good process?

Early. A late make good leaves you negotiating while you cannot show the space. A practical sequence we suggest (not a legal requirement):

Tenants follow a similar lease exit timeline, so line your dates up with theirs.

What should a property manager check in the lease?

Make-good obligations are rarely in one clause.

• Make good / yield up clause: what must be removed and the standard to return to.
• Definitions: what "Premises", "Lessee's Property", "Fit-out" and "Base Building" mean.
• Alterations clause and approval letters: whether consented works must be removed at the end. Fit-out approvals often attach conditions.
• Redecoration and fair wear and tear: whether a full repaint is required, and whether wear is excluded.
• Dispute or expert clause: the NSW Small Business Commission notes that retail leases often let a quantity surveyor make a binding decision on make-good costs if the parties disagree.
• Payment in lieu clause: whether you can elect to take cash instead of works.
• Security: amount, form (cash, bond or bank guarantee) and when it is returned.

Is it a retail lease?

It matters, because the retail leasing Acts add rules you cannot contract out of. In Victoria, the Retail Leases Act 2003 covers premises used wholly or predominantly for the retail sale or hire of goods or the retail provision of services (s 4). It excludes, among others, premises with occupancy costs over $1,000,000 a year excluding GST (Retail Leases Regulations 2023, reg 6) and tenants that are listed corporations (s 4(2)). Lease terms inconsistent with the Act are void to that extent (s 94). The landlord must maintain the structure, fixtures, plant and equipment, but not things the tenant is entitled or required to remove at the end of the lease (s 52), so keep the line between your plant and the tenant's fit-out clear in your schedule.

For offices, warehouses and most industrial leases, the retail Acts usually do not apply and the lease governs. NSW rules differ; see make good in NSW and make good in Victoria.

Full make good, keep the fit-out, or take cash?

You do not have to insist on a full strip-out. Think about what helps you re-let.

The NSW Small Business Commission notes that tenants often agree to pay the landlord instead of doing the make good, "leaving it to the lessor to carry out as necessary". There is no set formula, and a figure backed by itemised quotes is far easier for a tenant to accept than a lump sum. See the tenant's view in our payment in lieu guide.

How do you write a schedule of make-good works a tenant can price?

A vague notice ("reinstate premises to original condition") produces vague quotes and arguments. For each item, give:

• Location: level, room or grid reference, with a marked-up floor plan.
• What to do: remove, reinstate, repair, repaint, clean or leave.
• The standard: for example "ceiling tiles to match base-building tile", "carpet tiles to base-building specification", "patch and paint anchor holes".
• The lease reference and evidence: the clause or approval that requires it, and any start-of-lease photo you rely on.

Attach the base-building specification and the building's contractor rules (hours, lifts, loading dock, fire isolations). If the lease excludes fair wear and tear, separate it from damage: worn walkway carpet after ten years is different from holes where a safe was bolted down.

For the end-of-lease list a landlord serves, and how tenants check it against the condition report, see schedule of condition and dilapidations.

What inspections should happen before handover?

1. Scoping inspection (6 to 9 months out): walk the site with the tenant and your schedule, and note anything you will accept as is.
2. Pre-vacate inspection (a few weeks before expiry): check work in progress while contractors are still on site.
3. Final joint inspection (at handover): inspect against the schedule, photograph every area, and record "accepted" or a specific defects list.

Ask for the paperwork that proves the work was done properly: electrical certificates for make-safe work, asbestos clearance documents if asbestos was removed, waste disposal records, and confirmation from the building's fire contractor that fire services are reinstated.

What about asbestos and hazardous materials?

Before refurbishment or demolition work, the person who manages or controls the workplace must review the asbestos register and update it if needed (Victoria's OHS Regulations 2017, regs 240 and 241). SafeWork NSW requires a register for workplaces built before 31 December 2003. If you hold the register, give it to the tenant's contractors before they quote. See asbestos and hazardous materials at make good.

Who can sign off a make good: the agent or the landlord?

A common dispute: the tenant relies on an agent's "all good" email and the owner later disagrees.

• Check your authority. Your management agreement should say whether you can accept a make good and release security for the owner. If it is unclear, get the owner's written instruction.
• Sign off in writing. List what was inspected, what was accepted, any defects with deadlines, and whether any claim remains.
• Keep dated photos of every area, and collect keys, access cards and remotes.

When must the bond or bank guarantee be returned?

For non-retail leases, the lease sets the rules. If you intend to keep part of the security, tell the tenant in writing what for, with quotes, before the deadline.

What can a landlord do if the tenant didn't make good?

Usually you can do the work and recover the reasonable cost. The NSW Small Business Commission says tenants who don't carry out the make good "will normally be liable to pay the lessor's costs".

1. Document the gap: inspection report, dated photos, and the schedule item and clause for each shortfall.
2. Get itemised quotes for the outstanding work, priced against the same list.
3. Send a written claim with the quotes and a reasonable time to respond or finish the work.
4. Get legal advice before drawing on security or issuing proceedings, and check the lease for an expert determination clause.

Unauthorised alterations can strengthen a landlord's position. In Tabcorp Holdings v Bowen Investments [2009] HCA 8, the High Court allowed a landlord to recover the cost of reinstating a foyer the tenant had rebuilt without consent, not just the drop in the property's value.

Where do retail make-good disputes go?

• Victoria: either party can refer a retail tenancy dispute to the Victorian Small Business Commission for mediation (RLA 2003 s 86). VCAT can generally only hear it once the Commission certifies that mediation has failed or is unlikely to resolve it (s 87). The VSBC lists mediation fees of $300 per party for a half day and $600 per party for a full day, including GST, for most commercial disputes.
• NSW: NCAT says mediation is compulsory for most retail lease claims before applying to the Tribunal. NCAT's limit is $750,000 for leases entered into on or after 1 July 2017, and claims must be made within three years of the liability arising.

For non-retail leases, the VSBC also handles general commercial disputes in Victoria; otherwise, see a property lawyer.

How do you avoid make-good disputes on the next lease?

The next tenant's exit is decided when the lease is signed.

• A condition report with photos at the start, signed by both parties. The Victorian and NSW Small Business Commissions both recommend one.
• A base-building specification attached to the lease, and fit-out approvals that say whether each item must be removed at the end.
• A precise make-good clause: what must be removed, the standard, whether fair wear and tear applies, and whether you can elect a payment in lieu.
• Proper retail disclosure. Victoria's prescribed disclosure statement asks the tenant "Are you required to make good the premises at the end of the lease?", and the NSW Small Business Commission tells lessors to give clear details of end-of-lease works.

How MAKE GREAT works for landlords and property managers

Use MAKE GREAT to scope and price a make good: checking a tenant's scope, doing works after a payment in lieu, or pricing a claim.

• Analyse my lease. Our lease check finds the make-good, alterations and redecoration wording and drafts a preliminary list of possible works, each linked to its clause and page. Unclear clauses go to a person at MAKE GREAT for review. It is not legal advice, and a contractor must confirm the scope on site.
• Get my make-good quotes. We send one structured scope to independent contractors in our marketplace, so the quotes can be compared like for like. Read how contractors are vetted.

You choose the contractor and contract with them directly. MAKE GREAT is a technology marketplace, not a builder, quantity surveyor or law firm. Using MAKE GREAT is free for tenants, property managers and landlords. If you hire a contractor through us, they pay us a referral fee. Nobody can pay to rank higher. See how our referral fee works.

General information only, not legal advice.