Blog - Commercial

21 September 2018

COMMERCIAL MAKE GOODS – HERE’S WHAT CAN GO WRONG

A commercial ‘make good’ is a standard clause in most commercial lease agreements that requires a tenant to return a commercial space to their landlord in the same condition as the premises were in at the start of the lease.

We recently provided you with five helpful tips for making good. However, it’s also important to stay aware of things that may go wrong to further minimise your risks and costs.

Read these four things that can go astray when it comes to commercial make goods and what you can do to try and avoid them …

1.Disagreements over the building’s condition

The term ‘base building condition’ is commonly used to outline the extent to which the tenant must make good at the end of their lease. But this often gives rise to the subjective opinions of the landlord or the tenant.

The best way to avoid disputes in this instance is to obtain an objective building condition report from an independent consultant. This means arranging a third-party inspection both at the start and the end of your lease. This will give you a proverbial leg to stand on in the event of a dispute.

Ideally, these reports should be circulated to all stakeholders and should include photos so that an accurate comparison can be made. As the old saying goes, a picture is worth a thousand words.

A person filling out a building condition report when starting a lease to reduce risks when it comes to making good

2.Not keeping an itemised list of any changes you’ve made

Over time, it can be easy to forget changes that you’ve made to your leased commerical office space. To avoid underbudgeting, document any changes as they’re done so that you have all the information handy when it comes time for you (or your tenant) to make good. This will you plan and budget for any make good expenses.

If you haven’t already done so, start at the front door and walk through your office to refresh your memory. Note down every change that you have made and cross-check your notes against your business expense records.

3.Not checking with your landlord prior to making good

As a tenant, it’s important to meet with your landlord at the end of your commercial lease to agree to make good expectations before starting works. You might find that some of the changes that you’ve made are viewed by the owner as ‘improvements.’ If you’re lucky the landlord will be happy for them to remain, saving you unnecessary make good expenses.

A landlord and tenant shaking hands after making good at the end of a commercial lease

4.Ambiguously worded commercial make good clauses

Some make good clauses in commercial leases can be vaguely worded, leaving expectations unclear. The best way to avoid this is to make sure the clause is written in plain English that is easy to understand before you sign your commercial lease in the first place. It should also include appropriate dispute resolution provisions.

Always seek legal advice before signing a commercial lease and make sure that you fully understand your obligations (including any make good clause) before you sign on the dotted line.

Already locked in? If you didn’t do this and are nearing the end of your commercial lease, obtain legal advice to interpret your make good clause as it has been worded, before agreeing to any works.

The next step: looking for your new fresh space!

Now that we’ve highlighted what can potentially go wrong when it comes to commercial make good clauses (and how you can avoid problems) let us help you find you a new commercial space to lease. Speak to one of our friendly agents who will run through the best options for you!

Date: 21 September 2018 Author: TGC Writer
Commercial
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About the author:

TGC Writer

TGC is the largest privately owned commercial real estate agency in the Sydney CBD, with over 20 years experience servicing the CBD, City Fringe and greater Metropolitan property market. We’re committed to assisting you with your total property needs, including buying, selling, leasing and property management.

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