At the end of a lease term, there are requirements on the Lessee to “make good” the premises back to a condition that is agreed within the terms of the Lease, but usually subject to “fair wear and tear”.
Often the “make good” conditions can be extensive and specific such as:
- recarpeting the premises;
- removing all partitions and walls installed in the premises;
- returning the premises to open plan configuration;
- re-positioning the air conditioning ducting to open plan configuration;
- replacing damaged ceiling tiles and grids;
- reinstating the structure of any part of the premises which has been penetrated or altered by or on behalf of the Lessee.
Whereas at other times, the terms of a lease can be such that the Lessee is simply required to “make good the premises to their condition at the commencement date of the Lease, subject to fair wear and tear”.
With this in mind, it is therefore important when you are entering into a lease as Lessee, or leasing premises as Lessor, that photos are taken of the condition of the premises. A condition report should also be completed (usually by the agent) documenting the agreed state and condition of the premises when the Lessee takes occupation.
This can potentially help save disputes at the expiration of the Lease if it can show the state of the premises when the Lessee entered into the Lease.
It is also important to factor into the lease the potential cost of making good the premises at the expiration of the lease, particularly if there have been extensive modifications to the premises by the Lessee (with the Lessor’s and other relevant authorities prior consent). In some instances, the cost of making good the premises at the end of the lease can run into thousands of dollars.
Practically speaking, it may sometimes be possible to agree to leave items such as air conditioning units or alarms for example that may benefit a future Lessee, rather than removing them and making good the premises. However this arrangement would be strictly at the Lessor’s discretion.
Therefore it is advisable that before you enter into a lease as Lessee or you lease premises as Lessor, that you obtain legal advice as to either the obligations or requirements of make good under a lease.