More than likely, if you are a tenant in a commercial (or retail) premises and your lease is coming to an end, you will have to ‘make good’ the premises before turning your keys over to your landlord. A make good obligation requires the tenant to return the premises to their landlord in a similar condition to when they moved in.
Make good obligations are a contentious issue for landlords and tenants, resulting in costly and drawn out disputes. But many tenants are unaware of how to fulfil their make good obligations and what they involve. Below, we set out what steps a tenant should take upon signing a lease agreement to ensure they make good at the end of a lease.
Review Your Lease
A poorly-drafted make good obligation can result in the landlord and tenant having different expectations about how to ‘make good’ the property at the end of the lease. During lease negotiations, both parties should clearly set out their respective obligations when the lease comes to an end.
Contact Your Landlord
If you are unsure about your obligations, contact your landlord before your lease term ends to clarify. This can help avoid any misunderstandings further down the track.
Fill Out an Accurate Condition Report
Tenants should fill out an accurate condition report when they first lease the premises or document the condition of the property through photos and reports to the landlord or landlord’s agent.
Without a condition report, you will have no point of comparison when you are leaving the premises. For instance, if your landlord contends that the tiling on your premises was brand new and in perfect condition, you may find it difficult to claim otherwise.
Where a tenant cannot meet their obligations in time, parties may reach a cash settlement. For instance, where a make good obligation requires a tenant to remove the fit-out, stripping the premises back to its ‘bare shell’. This type of arrangement allows a tenant to fulfil their obligations before vacating without carrying out tasks that might disrupt business operations for a lengthy period.