Whether you’ve decided to pack up and move your business to another location or you’ve simply reached the end of your lease, you need to ensure that you “make-good” the location before returning the keys to your landlord. QVS Group dives into this often overlooked topic.
WHAT IN THE WORLD DOES “MAKE-GOOD” MEAN?
Make-good is a standard clause which is included in the vast majority of commercial property leases. This clause requires tenants to return the property to the state it was in when they moved in. Make-good clauses appear in agreements where a building is leased as a shell or renovated in some way, such as during an office fit-out.
Before putting ink to paper, make sure you’ve given your contract a through reading through. If you can’t find a make-good clause in the contract, make sure you double-check the fine print since these clauses are standard procedure and it’s rare for them to be absent. Since the tenants give priority to more vital details such as lease duration and what the property can and cannot be used for, they often skim over the make-good clause which means the clause may have some surprises.
Prior to vacating the premises, ensure you understand what the make-good clause is for and how it affects you as a tenant. This article will show you everything you need to know about make-good clauses so you shouldn’t face any unexpected hurdles when saying your final goodbyes to your landlord.
MAKE-GOOD CLAUSES EXIST TO PROTECT LANDLORDS
Knowledgeable or experienced landlords expect you to understand that their property is still their property, especially with plenty of modern start-ups envisioning big changes to their new office space, which they often then grow out of.
The make-good clause servers to keep the tenant in check, making them comprehend the importance of returning the leased property back to its original state when it’s time for the tenant to leave. If you’re planning a significant commercial office fit-out change for your leased space. For this reason, it’s a good idea to couple your landlord with your fit-out company so that everyone is on the same page.
LANDLORDS CAN “TRAP” TENANTS WITH A MAKE-GOOD CLAUSE
Usually, poor understanding or lack of leasing experience may result in tenants being completely liable for expensive make-good costs. Tenants should seek third-party expert advice when entering into a contract where details may seem vague or ambiguous. Legal advisers can also provide invaluable insight and representation when needed. Typically, tenants should only engage in lease agreements where make-good clauses include the phrase “fair wear and tear.”
“FAIR WEAR AND TEAR” IN ITSELF IS AMBIGUOUS
Landlords expect the condition of the premises to be returned to its original state (subject to fair wear and tear) when it’s time for the tenant to return the keys. However, their expectation may vary if, for instance, the tenant received a piece of property that has been refurbished by a previous client which is considered to add substantial value to the property in question. The fit-out cost may possibly offset additional make-good costs, saving the tenant tremendous amounts of money. When entering a lease agreement, make sure all details are clear and understood by both parties. Any vague phrasing of words could result in quarrels and even expensive litigation.
DON’T COMPROMISE ON THE FIT-OUT YOU NEED
It’s imperative that a tenant leases a space that fits their specifications even though they may need to invest in constructing a commercial office fit-out. Tenants need to be prepared to pay make-good costs by the time their lease agreement expires. Intentionally avoiding fit-out costs just to save on make-good expenses in the future can be counter-productive to your business.
This is why it’s a good idea to opt for an all-in-one package such as New Office Solutions. We will ensure all parties are on the same page, providing tenants with clear expectations and ensuring everything runs to plan and on budget.
PAYING THE MAKE-GOOD COST MAY BE PREFERABLE TO A MAKE-GOOD
Depending on the situation, you may be able to pay a make-good fee rather manage the make-good process yourself. The landlord may prefer one option over the other give the situation, but don’t feel pressured into choosing what they would prefer. In most cases, a make-good payout has the benefit of fulfilling the landlord’s written demand in the lease agreement.
The benefit of a payout is that you know exactly Failed attempts at fulfilling the make-good clause could possibly leave the landlord dissatisfied, resulting in dispute and, in extreme cases, legal action and quickly rising costs for a tenant.