When a commercial lease ends, one of the most common causes of dispute is the ‘make good’ clause — especially if it’s unclear or misunderstood.

Make good obligations can mean surprise costs, delays, or legal headaches for both landlords and tenants. Understanding your responsibilities upfront helps you avoid these issues. At City Pacific Lawyers, we help clients understand their responsibilities upfront — and avoid problems at the end of the lease.

Here’s what to look for in a make good clause, how they work in Victoria, and how to avoid expensive mistakes.

A Make Good Clause Sets Out the Condition for Returning the Premises

A make good clause sets out what condition the tenant must leave the property in when the lease ends.

The clause is recorded in the tenancy agreement itself, forming part of the legally binding obligations between the tenant and landlord.

Requirements vary, but often include:

  • Cleaning and removing personal belongings
  • Repainting or repairing damage
  • Stripping out any fit-out or non-fixed alterations
  • Restoring the space to its original state or ‘base build’ condition

These obligations are often negotiated upfront, but disputes can arise when expectations aren’t clear.

Clear Terms Help Both Tenants and Landlords Avoid Surprises

Under the Retail Leases Act 2003 and standard commercial leasing practice, make good clauses should be discussed and documented before the lease begins.

Key issues to clarify include:

  • The required condition of the rental property on exit
  • Whether minor wear and tear is excluded
  • If cash in lieu of work is acceptable
  • How landlord-approved changes should be handled

Get a condition report signed by both parties at the start of the lease. It will be your reference point when the tenancy ends, and can help avoid disputes.

Make Good Disputes Are Often Avoidable

Disagreements tend to arise over:

  • Whether fixtures should be removed or can stay
  • The standard of restoration required
  • Damage versus fair wear and tear
  • Whether any works need landlord approval

Even minor misunderstandings can delay re-leasing or trigger financial claims — which is why you should get legal advice from the beginning.

What If There’s a Dispute at the End of the Lease?

Options to resolve a make good dispute include:

  • Reviewing the lease and condition report
  • Direct negotiation
  • Engaging a quantity surveyor for cost disputes
  • Seeking legal advice or mediation
  • Escalating to VCAT, if necessary

Well-drafted terms can help avoid disputes altogether — but when disagreements arise, it’s important to act quickly and with expert advice.

Can Tenants Offer a Cash Payment Instead?

Yes. Sometimes, both sides agree on a cash payment instead of make good works. This can make handover simpler and give the landlord flexibility.

If you can’t agree on the amount, bring in a quantity surveyor for an independent cost estimate.

Don’t Let Make Good Catch You Out

Make good clauses can have a big financial impact, especially if the terms are vague or misunderstood. Know what you’re signing and avoid expensive surprises.

It’s critical to get expert legal advice before you sign a new lease or exit an existing one.

At City Pacific Lawyers, our property and commercial leasing specialists help both landlords and tenants draft, review, and resolve commercial lease terms. We’ll help you get it right — from day one to the final handover.

Contact us on (03) 9592 3356 or book a free consultation for tailored advice on your commercial lease.