PA LAW • COMMERCIAL LEASES • SOUTH AUSTRALIA
Commercial lease make-good clauses can leave South Australian tenants facing substantial costs after trading has ended. Returning the keys may not be enough. Watch PA Law’s short tenant guide, then use the checklist below to identify what should be reviewed before signing, renewing or leaving commercial premises.
Commercial lease make-good clauses: the short answer
A make-good clause sets out the condition in which a tenant must leave the premises when the lease ends. Depending on the wording, a tenant may have to remove its fit-out and signage, repair damage, repaint surfaces, remove cabling or services, clean the premises and reinstate changes made during the tenancy.
The starting point is the lease itself. A landlord’s approval of plans or a fit-out does not necessarily waive a separate obligation to remove that work later. The tenant should also check any incentive deed, fit-out deed, licence, disclosure statement, condition report, variation and written agreement reached during the lease.
Why commercial lease make-good clauses can become expensive
Make-good work often arises when a business is already paying relocation expenses, purchasing a new fit-out and managing the end of trading. The clause may require more than repairing tenant-caused damage. Some wording requires reinstatement to an earlier condition, even where an alteration improved the premises.
Disputes can also arise about the condition at commencement, whether an item belongs to the landlord or tenant, what amounts to fair wear and tear, the standard of workmanship, the deadline for completion and whether the landlord may perform the work and recover its cost.
Commercial lease make-good clauses: tenant checklist
- Identify the required end condition. Does the clause require a clean and tidy handover, repair of damage, removal of specified items or complete reinstatement?
- List every fit-out item. Include partitions, flooring, counters, shelving, signage, data cabling, plumbing, electrical work, security systems and air-conditioning alterations.
- Record the starting condition. Keep dated photographs, a detailed condition report and correspondence about existing defects.
- Check approvals carefully. Confirm whether approval to install an item also deals expressly with removal at the end of the lease.
- Review linked documents. The make-good position may be affected by an agreement for lease, incentive deed, fit-out contribution, licence or later variation.
- Negotiate before commitment. Consider limiting the obligation to specified work, excluding fair wear and tear, or allowing the landlord to elect what must remain.
- Plan well before expiry. Obtain the landlord’s written requirements, contractor quotes and any necessary approvals before the final weeks of the term.
Can tenants negotiate commercial lease make-good clauses?
Yes. Commercial terms are commonly negotiated before signing or renewing. Possible approaches include excluding existing improvements, limiting removal to tenant-installed items, agreeing that useful fixtures remain, setting an objective repair standard, excluding fair wear and tear, documenting the initial condition, or establishing a process and deadline for the landlord to give make-good directions.
The right drafting depends on the premises, proposed use, bargaining position and cost of the fit-out. A brief clause can still create a large financial exposure, so the likely exit cost should be assessed with the rent, outgoings, security, term and options.
South Australian commercial leasing context
Some South Australian premises may fall within the Retail and Commercial Leases Act 1995, while other commercial leases may not. Coverage and statutory requirements depend on the premises and circumstances. The make-good obligation itself must still be considered against the actual documents and applicable law.
Read the current Retail and Commercial Leases Act 1995 on the South Australian legislation website. For advice on a particular lease, obtain a review before signing, renewing, assigning or surrendering it.
Video transcript
0:01 Your lease ends on Friday. You hand back the keys, walk away—and then receive a bill for $30,000. Why?
0:11 Two words: make good. A make-good clause in a commercial lease may require you to remove your entire fit-out, take down signage, repair damage, repaint the premises—or even return it to the condition it was in before you moved in.
0:30 Simply saying that the landlord approved the fit-out may not protect you.
0:36 Before signing or renewing a commercial lease, find out exactly what you will have to remove, repair and pay for when the lease ends.
0:43 Because the cheapest time to negotiate your exit is before you move in—not when you’re trying to move out.
Frequently asked questions
Does landlord approval mean the fit-out can stay?
Not necessarily. Approval to install a fit-out may be separate from the tenant’s make-good obligation. Check whether the approval, lease or later written agreement expressly says what happens when the lease ends.
Does fair wear and tear apply automatically?
Do not assume it does. Review the repair, maintenance, yielding-up and make-good provisions together. The precise drafting and relevant law determine the standard required.
When should a tenant review make-good obligations?
Ideally before signing or renewing, and again well before expiry, assignment or surrender. Early review allows time to clarify the landlord’s position, negotiate where possible, obtain quotes and plan the work.
Can PA Law review a commercial lease in South Australia?
PA Law assists businesses with commercial lease reviews and advice, including clauses dealing with fit-outs, repairs, outgoings, options, assignments and make-good obligations.
This page provides general information only and does not create a solicitor-client relationship. Do not rely on it as a substitute for advice on your lease and circumstances.