A make good clause is an owner’s assurance that once the tenant has left their space they return it back to them in the same condition that they found it.
This would generally mean, in terms of an office fitout, the removal of all fixed and non-fixed partitions, features, furniture, electrical and building services.
It will also mean you need to repair base building fittings and fixtures, so that the tenancy presents exactly the same as when you received it.
WHAT IS THE DIFFERENCE BETWEEN FULL MAKE AND PARTIAL MAKE GOOD?
If you’re inheriting someone else’s fitout, some owners will try and push for you to perform a full make good at the conclusion of your lease.
A full make good would be reasonable if you are taking over a freshly refurbished space.
A partial make good obligation should read that you are reinstating the space, to the same condition that you inherited it.
TENANCY BASE BUILDING FIXTURES AND FITTINGS
In nearly all cases, the norm in commercial office environments is that a landlord will provide:
- a commercial grid ceiling
- finished perimeter partitions, painted
- carpet, tiles or broadloom
- front door
- essential services such as commercial lighting, compliant fire systems, compliant emergency egress and warning systems.
TIP: You should always ask for Certificates of Compliance and a Final Certificate of Compliance from the landlord, issued when a compliant space has been completed and reviewed by authorities. The owner will be able to provide this, only if the works were performed in accordance to all relevant codes and regulations.
Other items that owners provide in some cases, or when requested, or when the type of building would require, include:-
- blinds
- kitchenette + plumbing
- ambulant bathroom /or shower
WHAT’S GREAT FOR A LANDLORD HOLDING A MAKE GOOD CLAUSE OVER YOU
A landlord will know that when you are looking to leave the space or building they will have an obligation from you and a bargaining tool to receive a cash injection into their business.
A landlord will always offer the opportunity for you to walk away from the make good obligation.
But they will do this at a cost. A cost that they will justify as a fair and reasonable price for them to perform the make good work themselves.
The reality is, your existing tenancy has a value to them.
Why? Because…
- Your existing tenancy makes the empty space more ‘marketable’ in most cases than a cleared out open tenancy would.
- Your existing tenancy presents to a new tenant the opportunity to take on a portion of the fitout, without having to spend their own money.
- Landlords use the value of the fitout you left behind as a portion of the incentive for the incoming tenant, saving them $$$ again.
However, landlords may need to clear out your tenancy and then make changes to make the space ‘leaseable’, thus costing them money. Below are some points that will help you through this negotiation.
NEGOTIATING THE MAKE GOOD CLAUSE:
- Should you have a make good clause in your fitout? If you take a longer term, such as 7 years or represent as a suitable asset to a building owner, you can easily state your claim that you don’t deserve to have a make good clause upon your exit.
- You should look into creative alternatives that benefit both sides of the negotiating table to see the make good removed. Such as, moving into another building within the owner’s portfolio.
- In every circumstance, always be prepared to do the make good yourself. It is an additional cost, but one that needs to be accounted for from the get-go. Speak to Agero for a quick budget estimate on your make good.
- Damaged vs normal use: Just like leasing an apartment, you are not expected to replace the carpet if it was subjected to normal use. This applies to all fittings and fixtures.
- Prepare a budget estimate yourself, ready to counter the landlords make good settlement figure. You can guarantee the landlord won’t be interested in submitting his lowest quote to you so having your own figures at hand will force his hand.
- Make a dilapidation report upon taking possession of the tenancy. Take photographs and be clear on the condition when you moved in. Be clear that you are not expected to bring the tenancy back to new, only to the condition you found it in – with consideration of ordinary usage.
Agero can help you return the premises in a clean and tidy condition. Talk to us today to remove the stress of make good when you finish your lease.
