What is a ‘make good obligation’?
A tenant has an obligation to return the leased premises to the landlord in a similar condition to how they were at handover. Common examples include:
Removing the tenant’s property (i.e. desks and chairs);
Repairing any damage caused while the tenant occupied the property;
Removing the tenant’s fixtures and installations (i.e. wall partitions).
This also means leaving the premises clean and tidy except for fair wear and tear.
Make good provisions under the lease
The terms of the make-good obligation are generally discussed between the tenant and the landlord during lease negotiations. The tenant’s make-good obligations can range from minimal to onerous, such as removing the tenant’s fit-outs.
Retail lease
The make-good provisions under a retail lease must be consistent with the Retail Leases Act. For example, under a retail lease, the tenant is responsible for returning the premises in their original condition at the end of the lease, while the landlord is responsible for repairing and maintaining the premises during the lease term.
The landlord’s obligation to repair and maintain the premises is limited to:
the landlord’s plant and equipment at the premises; and
any appliances, fittings and fixtures provided by the landlord under the lease.
However, the tenant is responsible for damage where repairs or maintenance are required due to the tenant’s misuse of the premises, or where the tenant must remove the item at the end of the lease.
Commercial lease
Unlike retail leases, commercial leases are not governed by a specific law. This leaves the landlord and tenant with more room to negotiate the lease terms. For example, the parties may agree to make the tenant responsible for maintaining the landlord’s equipment at the premises and carrying out repairs during the lease term.
What to consider
All leases should clearly set out the make-good provisions. For example, the landlord and tenant should consider which fit-outs should be removed and who is responsible for carrying out and paying for the removal. A fit-out that is valuable to the tenant may not be valuable to the landlord or the next tenant.
It is also useful to have a condition report before a tenant moves in or starts any fit-out work. A condition report will clarify the steps the tenant must take to return the premises to a condition similar to its original state.
For more information about W Legal Group’s property conveyancing Victoria services, visit the Property page. For leasing queries or assistance, contact our conveyancing lawyers in Melbourne at hello@wlegalgroup.com.au or (03) 9590 6180
