What can a make good clause require?
| Level | What it usually means |
|---|---|
| Remove and clean | Stock, loose fittings and the tenant's equipment out, premises left clean |
| Back to the starting condition | Damage beyond fair wear and tear repaired, measured against the condition report |
| Strip to base building | The fitout removed back to bare shell, then redecorated, usually repainted |
Read the clause for three more things. Whether a quantity surveyor is named to settle the cost if the parties disagree, which many retail leases provide. Whether the landlord can take a payment instead of the works. And what happens to improvements the next tenant could use, since the parties can agree to leave them.
When does the clock start?
In NSW, where the Retail Leases Act applies and the lease has no option to renew, the landlord must tell the tenant in writing whether a new lease will be offered, at least six months and not more than twelve months before the lease ends. If an offer is not accepted within one month, it can be withdrawn. If no notice is given, the lease can run on month to month, and either side can then end it on one month's notice.
For a fleet, price the make good when that notice arrives. A strip out, a repaint and the trades to make services safe all need booking, and in a shopping centre they need the centre's approval and its hours.
What does the condition report decide?
Most make good disputes turn on it. The NSW Small Business Commissioner advises documenting the premises at the start of the lease with a condition report, and the Victorian Small Business Commission tells tenants to ask for the report and take photos before taking possession.
A tenant who took over an existing lease by assignment may owe the condition at the start of the original lease, not the day they moved in, so a new inspection at assignment matters. And without a report, damage that was already there is hard to prove.
What happens if make good is not done?
The landlord may keep the bond, or claim its loss, including rent for the time it takes to return the premises to the agreed state. Where the lease names a quantity surveyor, the cost can be settled by a binding determination. The small business commissions in NSW and Victoria both run low cost mediation for retail lease disputes.
Does my state's retail leases act apply?
| State or territory | Act |
|---|---|
| NSW | Retail Leases Act 1994 |
| Victoria | Retail Leases Act 2003 |
| Queensland | Retail Shop Leases Act 1994 |
| Western Australia | Commercial Tenancy (Retail Shops) Agreements Act 1985 |
| South Australia | Retail and Commercial Leases Act 1995 |
| ACT | Leases (Commercial and Retail) Act 2001 |
| Northern Territory | Business Tenancies (Fair Dealings) Act 2003 |
| Tasmania | Fair Trading (Code of Practice for Retail Tenancies) Regulations 1998 |
Several of these do not apply to large shops or to tenants that are listed companies, and the tests differ by state. For a national retailer, the lease clause may be the only rule on a big box store. Check each lease.
Where an act does apply, it can change the answer. In Victoria, section 52 of the Retail Leases Act makes the landlord responsible for the structure, its fixtures, plant such as air conditioning, and the fittings for gas, electricity and water it provided, but not for items the tenant is entitled or required to remove at the end of the lease.
Read the clause with your lawyer before pricing it. This is general information, not legal advice.
The works in a typical make good
- Shelving, fixtures and the tenant's fitout removed
- Signage taken down and the fascia patched and painted
- Circuits the tenant added made safe or removed by a licensed electrician, with a certificate
- Walls patched and repainted in the base building colour
- Floor coverings lifted or replaced, and the slab left as the lease requires
- Ceiling tiles replaced where fittings came out, and a final clean
Nextage can run these as one scope per store: the lease clause and the condition report set the list, licensed teams do the trade work, and each store closes with photos against the report.
