Understanding Your Lease - 'Making Good' at the End of the Lease

Posted by Malcolm Campbell, Luke Mitchell on 19 July 2017
Understanding Your Lease - 'Making Good' at the End of the Lease

When the lease ends it is most likely that the lessee will be required to take out all of their fixtures and fittings, and ‘make good’ any damage caused during their occupancy and/or in removing their fixtures and fittings. Irrespective of how new, nice, reusable or expensive a fit-out may be, most leases will require a lessee to remove it at their own cost (which is often not insubstantial). If a lessee does not remove their fixtures and fittings on time, they are most likely to become the property of the lessor, and the lessor can, at the lessee’s expense, attend to the make good.

 

Consider these additional factors:

Deemed holding over

Some leases oblige the lessee to pay rent as though it was holding over until it has complied with its make-good obligations in full. Depending on the precise wording of such leases, this can enable lessors to rely upon immaterial errors by the lessee in complying with its make-good obligations as an excuse to continue to charge the departed lessee full rent while the lessor finds a replacement lessee.

Interaction with sub-letting

Lessees should be wary about sub-letting premises for the balance of a lease term, as this can leave them with insufficient time at the end of the sub-lease to comply with their own make-good obligations.

Structural soundness and weatherproofing

Lessors’ standard leases rarely oblige lessors to keep the building structurally sound and weatherproof. In the absence of such an obligation, circumstances can arise under which it is very difficult for the lessee to comply with its general repair obligations.

Payments to avoid make-good

Some lessors may be willing to grant a lessee an option to pay a pre-determined ‘make-good amount’ in lieu of performing an end-of-tenancy make-good of the premises. This provides the lessee with the flexibility to continue to carry on its business in the premises until the end of the lease term, if they would prefer that over vacating early and continuing to pay rent while the make-good is being performed.

Contact us so we can help you to understand and meet your requirements to 'make good' under your lease.

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