When drawing up a business lease agreement, there are a number of distinct terms that you, as the landlord, need to give careful thought to. The “make good” clause is an important part of any business leasing agreement. Who, however, stands to gain from a make good provision, and what exactly is it? Keep reading to learn about the make good clause and how to include it into your contract.
What Does a Make Good Clause Mean?
A make good clause in a lease specifies the exact state to which the renter is obligated to restore the property upon the expiration of the lease. This clause may range from just leaving a room in a clean and tidy state to completely dismantling all fit-out and restoring the utilities (air conditioning, lighting, etc.) to base building conditions.
Landlords and renters should have a crystal-clear grasp of the make good clause before signing a lease, since this is a regular source of disagreement between the two sides.
The Best Usage for a Make Good Clause
Leasing is a long-term commitment, so it’s important to be ready for any repairs that may be needed. Tenants often make the mistake of not keeping track of the condition and quality of the fitout when they first move in. Five, 10, or even more years may have passed after the contract was first signed.
The state of the premises at the beginning of the lease is recorded in the dilapidation report, making its completion essential. Photos with timestamps and thorough comments from the inspection should be included in the report. Both parties should inspect the property, make notes of any damage they see (such as cracks or missing tiles), and then sign and date the dilapidation report in the presence of witnesses.
In What Ways Would One Be Able to Save Costs?
Before signing a lease, it’s crucial to familiarise yourself with the make good clause so you may negotiate with the Lessor for a more favourable, cost-cutting arrangement if the need arises.
You may avoid costly removal by leaving the fitout in place if the new tenant finds value in it. On the other hand, the Lessor may specify some objects that are not to be removed. It’s also possible to limit your clause responsibilities or arrange a financial settlement with the Lessor. It’s crucial to have these talks since it’s easy to find something that everyone is happy with.
Is It Different to Redecorations?
Although both terms may seem identical at first glance, it is vital to recognise the major distinctions between the two in order to fully understand your duties as a Lessee.
There should be a condition in the lease that specifies how often the interior of the property has to be updated (for example, every five years) and what exactly the Lessee is responsible for doing to achieve this (e.g. internal and external painting, replace floor coverings, replace window coverings). A redecorating provision, in contrast to a make good clause, is intended to keep the home looking excellent during the lease. Thus, redecorating duties are likely to cost much less than the clause.
The responsibility to this clause property is separate from the need to pay rent since it applies only at the conclusion of the lease and is often a considerably more lengthy task.
Make sure you remember your make good clause commitments while thinking about a tenant’s desire to transfer a lease. As a result, it is in everyone’s best interest to make sure the lease’s business provisions pertaining to this clause are crystal clear.