What is make good? A plain-English guide for commercial tenants

Make good is the promise, in a commercial lease, to hand the premises back in a stated condition when the lease ends. If you rent an office, shop, warehouse or clinic, your lease probably has a make-good clause, and it can be a significant cost of moving out. This guide explains what the term means, the three shapes a clause usually takes, and what to do first.

General information only, not legal advice. For advice on your own lease, speak to a property lawyer or your state's Small Business Commission.

What does make good mean in plain English?

It means: leave the place the way the lease says you must leave it.

The NSW Small Business Commission's retail tenancy guide describes make good as the tenant's end-of-lease obligation to return the premises to the condition they were first built in, to their condition at the start of the lease, or to some other condition the lease specifies. The same guide says make-good provisions typically require the premises to be returned "in an empty and neutral state", which is not necessarily how they looked when you moved in. It can mean stripping back to the base building and redecorating.

You will also see it written as "makegood", "make-good" or "making good". They all mean the same thing.

Is make good a legal requirement?

Not in itself. Victoria's Retail Leases Act 2003, for example, has no provision defining make good or reinstatement. Make good is a contract term: it exists because your lease says so, and it means what your lease says.

That has two consequences:

• Two tenants in the same building can have very different obligations, because their leases differ.
• The wording is enforced closely. For example, Victoria's Property Law Act 1958 lets a court relieve a tenant from an unreasonable notice to do internal decorative repairs during a lease, but section 147(2)(d) says that relief does not apply to a covenant to hand the building back "in a specified state of repair at the end of the term".

What are the three common types of make-good clause?

Most clauses fit one of these shapes. Find the one closest to your wording.

Type 3 is usually the most work, because it includes everything in types 1 and 2. If your lease says "reinstate", "restore" or "base building", read our guide to make good vs reinstatement vs restoration and the lease reinstatement page before you get quotes.

What do the key phrases mean?

• "Yield up": hand back possession at the end of the lease.
• "Fair wear and tear excepted": normal ageing from ordinary use is not your problem. Without these words, it may be.
• "Tenant's fixtures and fittings" or "tenant's works": what you installed, as opposed to what the landlord provided.
• "Condition at the commencement date": how the premises were on day one of your lease. A condition report is the best evidence of this.
• "Base building": the landlord's standard specification before any tenant fit-out.
• "To the reasonable satisfaction of the lessor": the landlord has a say in sign-off, so get acceptance in writing.

For a line-by-line walk-through of a real clause, see your make-good clause explained.

What work is usually included in a make good?

It depends on the clause, but a full make good on a fitted-out tenancy commonly involves:

• removing partitions, offices, joinery, kitchens and signage you installed
• removing your data cabling, and having a licensed electrician disconnect your power back to safe points
• repairing walls, ceilings and floors damaged by fixings or removal
• reinstating ceilings, lights and air-conditioning outlets to the original layout (reinstatement clauses only)
• repainting, often in the building's standard colour
• removing or replacing floor coverings
• a final clean and rubbish removal

In warehouses it can also mean removing racking, filling anchor holes, removing line marking and repairing the slab. See warehouse make good. For shops, see retail make good, and for offices, office make good.

Does make good include fair wear and tear?

Usually not, but check. The Victorian Small Business Commission says a retail tenant's obligation to return premises to original condition typically means removing their fit-out and repairing damage "above fair wear and tear".

A clause can still ask for more. The VSBC notes that a repainting clause can require a tenant to repaint to a new condition even where the starting condition was poor, "if this is what the tenant has agreed to in the lease". So if your lease says "repaint", budget for it whatever the walls looked like when you moved in.

Do retail leases have different make-good rules?

The make-good clause still governs, but retail lease laws in Victoria and NSW add some protections around it.

• Disclosure before signing. In Victoria, the prescribed landlord's disclosure statement includes the question "Are you required to make good the premises at the end of the lease?" (Retail Leases Regulations 2023, Schedules 1 and 2). In NSW, the Small Business Commission tells landlords to give clear details of the works required to make good. Your disclosure statement is worth finding.
• Landlord repairs. In a Victorian retail lease, the landlord must maintain the structure, fixtures, plant and equipment, but is not responsible for repairing something the tenant is entitled or required to remove at the end of the lease (Retail Leases Act 2003, s 52).
• Disputes. Retail make-good disputes in Victoria go to Small Business Commission mediation before VCAT. In NSW, NCAT says mediation is compulsory for most retail lease claims before you apply to the tribunal.

Office, industrial and larger tenancies are often not "retail" leases, so these extra rules may not apply. In those leases, the lease and the general law decide. For state detail, see make good in Victoria and make good in NSW.

What happens if you do not make good?

The landlord can normally do the work and recover the cost from you. The NSW Small Business Commission says that if tenants don't carry out the make good, "they will normally be liable to pay the lessor's costs". In practice, landlords often recover this from the bank guarantee or bond.

If you altered the premises without consent, the risk is higher. In Tabcorp Holdings v Bowen Investments (2009), the High Court allowed the landlord to recover the full cost of reinstating a foyer the tenant had rebuilt without consent, not just the drop in the building's value.

Some tenants agree to pay the landlord a cash amount instead of doing the works. The NSW Small Business Commission notes this is common. There is no set formula for the amount, so get your own itemised quote first. See make-good payment in lieu and who pays for make good.

What should you do first if your lease is ending?

1. Find the documents: the lease and any variations, the make-good and alterations clauses, fit-out approval letters, the start-of-lease condition report and photos, and the disclosure statement if you have a retail lease.
2. Copy out the make-good clause word for word and decide which of the three types it is.
3. Ask the landlord in writing which standard applies and which items, if any, can stay.
4. Walk the space and list each item as remove, reinstate, repair or leave.
5. Get comparable quotes against that one list, so every contractor prices the same scope. Our make good cost guide explains what drives price.
6. Agree sign-off in writing with the right person before you hand back the keys.

Our lease exit timeline sets out when to do each step, and the office make good checklist turns it into a list you can tick off.

How MAKE GREAT can help

• Analyse my lease. Upload your lease and our lease check finds the make-good, reinstatement and alterations wording and drafts a preliminary list of possible works, with a reference to the clause and page for each finding. It is preliminary only. Unclear clauses are flagged for a person at MAKE GREAT to 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 you can compare quotes like for like.

You choose the contractor and contract with them directly. MAKE GREAT is a technology marketplace, not a builder or a law firm. Free for tenants. If you hire a contractor through us, they pay us a referral fee. Nobody can pay to rank higher.

General information only, not legal advice. Your lease wording, and advice from a property lawyer, decide your actual obligations.