Makegood obligations are the requirements in a commercial lease that specify the condition in which a tenant must return leased premises to the landlord at lease end. In most NSW commercial leases, makegood requires the tenant to remove their fitout, repair any damage caused during occupancy, and return the premises to a defined standard — which may be the original condition at lease commencement, a “good and substantial repair” standard, or a painted, clean, and stripped-back state ready for the next tenant.
Gladison Constructions executes makegood works for commercial tenants across Sydney and New South Wales — from small office strip-outs to full tenancy strip-back and reinstatement across multiple floors.
- Makegood obligations are defined in the lease, not in statute — the exact scope varies from lease to lease and must be read carefully before any works commence.
- Commercial leases in NSW (other than retail leases under the Retail Leases Act 1994) are entirely governed by the lease terms, giving landlords significant latitude to define makegood scope.
- Common makegood requirements include fitout removal, partition demolition, ceiling and floor reinstatement, painting, and services capping.
- Makegood disputes most commonly arise over the interpretation of “original condition” and whether specific improvements count as makegood obligations or permanent fixtures.
- Financial settlement (paying the landlord a cash sum in lieu of physical works) is sometimes negotiable — but only before lease expiry, and only with the landlord's written agreement.
- Engaging a builder early to scope makegood works — ideally 3–6 months before lease expiry — avoids the most common cost and time overruns.
What Are Makegood Obligations?
Makegood obligations are the set of physical and financial requirements a commercial tenant must satisfy when vacating a leased property. The obligations are defined by the specific lease agreement — they are not a fixed legal standard applied uniformly across all tenancies.
A typical makegood clause in a Sydney commercial lease requires the tenant to remove all fixtures, fittings, and equipment installed during the tenancy; repair any damage to the fabric of the premises, including floors, walls, ceilings, and services; and leave the premises clean, in good repair, and in a condition consistent with the standard specified in the lease. The critical distinction is that makegood is a contractual obligation, not a legislative one. A commercial tenant who signs a lease with extensive makegood obligations is bound by those obligations regardless of whether performing them is commercially disadvantageous.
What Physical Work Does Makegood Typically Require?
Makegood works in a commercial tenancy typically fall into five categories: strip-out, building fabric reinstatement, services reinstatement, cleaning, and handback condition.
Strip-out is typically the largest single cost item. Removing a fully fitted commercial office from a 500 m² Sydney tenancy costs between $25,000 and $75,000 depending on fitout density, floor level, and building access.
How Is the Makegood Standard Defined?
“Original condition” requires the tenant to restore the premises to the state it was in at lease commencement. This is the most tenant-onerous standard, because it requires undoing all improvements — not just obvious fitout — even if those improvements added value to the premises. Tenants should request a detailed condition report with photographs at lease commencement, as this becomes the evidentiary benchmark at lease end.
“Good and substantial repair” requires the premises to be in good repair, but does not necessarily require restoration to original condition. This standard allows for fair wear and tear and is more commonly found in longer leases. “Make good all damage” is a more targeted standard requiring only that damage caused by the tenant be repaired — the most tenant-favourable option, though it still creates obligations around patching, painting, and cleaning. Understanding which standard applies requires careful reading of the makegood clause, the definitions section of the lease, and any fitout deed entered into separately.
How Much Does Commercial Makegood Cost in Sydney?
Makegood costs in Sydney vary significantly based on tenancy size, fitout density, lease standard, and the extent of alterations made during the tenancy. The following cost ranges reflect 2026 Sydney market rates.
The biggest cost driver is how extensively the tenant modified the premises during occupancy. Asbestos management is a significant cost variable in pre-1990 Sydney buildings — asbestos removal adds $5,000–$40,000 or more to makegood costs depending on the quantity and type of material involved. Engaging a contractor to provide a fixed-price or schedule-of-rates makegood quote at least three to four months before lease expiry allows time to budget accurately, negotiate with the landlord on contested items, and programme the works without incurring holdover rent.
What Happens If You Cannot Complete Makegood Before Lease Expiry?
If a tenant cannot complete makegood works before the lease expiry date, the tenant remains in “holdover” — continuing to occupy the premises on the existing lease terms, usually month-to-month at the existing rent or a holdover rate. Holdover exposure is one of the most common avoidable costs in commercial makegood situations.
Property Council of Australia data indicates that the average commercial lease in Sydney carries 8–12 weeks of makegood works for a medium-density fitout. Tenants who engage a contractor two months before expiry commonly discover they cannot complete works in time. The practical mitigation is early engagement — engaging a builder six months before lease expiry allows time to obtain a detailed scope and price, negotiate disputed makegood items with the landlord, programme the works to complete within the remaining lease term, and arrange a landlord inspection at practical completion.
Can You Pay a Cash Settlement Instead of Doing Makegood Works?
A financial settlement in lieu of physical makegood works is sometimes negotiable — but only if the landlord agrees to it in writing, and typically only before the lease expires. A landlord is under no obligation to accept a cash payment instead of physical reinstatement.
Cash settlement is most likely when the landlord intends to refurbish the premises for the next tenant regardless of what the departing tenant does. In that case, the physical makegood works have no commercial value to the landlord, and a cash payment that covers the notional cost of those works is a reasonable outcome for both parties. Tenants who have made improvements that genuinely add value — a well-fitted kitchen, high-quality carpet, or LED lighting upgrades — sometimes have grounds to negotiate a reduction in makegood obligations on the basis that those items will be retained.
This article is general guidance only and does not constitute legal advice. Commercial tenants and landlords should review their specific lease terms and seek independent legal advice before commencing or disputing makegood works.
Frequently Asked Questions
Q: What is makegood in a commercial lease?
A: Makegood in a commercial lease is the contractual obligation requiring a tenant to return leased premises to a specified condition when the lease ends. The standard and scope vary by lease — common requirements include removing the fitout, repairing damage, repainting walls, capping services, and cleaning. Makegood obligations in commercial (non-retail) NSW leases are set entirely by the lease terms and are not subject to the same legislative constraints that apply to retail leases.
Q: How much does commercial makegood cost in Sydney?
A: Commercial makegood costs in Sydney range from $15,000 for a small, lightly fitted tenancy to $200,000 or more for a large, heavily modified office floor. A medium-density 300–500 m² Sydney office typically costs $40,000–$100,000 to make good. The primary cost drivers are fitout density, the extent of services modifications, floor level, and whether asbestos-containing materials are present in the building.
Q: Do I have to remove everything from a leased office when I leave?
A: It depends on your lease. Most commercial leases require the removal of all tenant-installed fixtures and fittings — partitions, joinery, kitchen equipment, branded signage, and cabling. Some leases allow the landlord to elect to retain certain improvements. The specific list of items to be removed is determined by the makegood clause, the fitout deed, and any correspondence with the landlord's representative about what the landlord intends to retain.
Q: What is the difference between makegood and a strip-out?
A: A strip-out is the physical demolition and removal of fitout elements — partitions, ceilings, raised floors, and services. Makegood is the broader obligation that also includes reinstatement works, cleaning, and handback in the required condition. Strip-out is a construction activity; makegood is the lease obligation that may require a strip-out to be performed.
Q: How long before my lease ends should I start planning makegood?
A: Start planning makegood at least three to six months before lease expiry. This allows time to engage a contractor, obtain a detailed scope and price, negotiate any disputed items with the landlord, programme the works, and complete them before the lease end date. Tenants who leave makegood planning to the last six weeks typically face holdover rent exposure, rushed workmanship, or both.
Q: Can a landlord charge me for makegood I did not do?
A: Yes. If a tenant vacates without completing makegood obligations, the landlord can pursue the cost of completing those works as a debt claim under the lease. In most commercial leases, the landlord has the right to carry out any uncompleted makegood works and recover the reasonable cost from the tenant.
Q: Is fair wear and tear excluded from commercial makegood?
A: Fair wear and tear exclusions depend on the specific lease. Many commercial leases do not include a standard fair wear and tear exclusion — unlike residential leases, which have statutory protections for tenants. Tenants should review the exact wording of their makegood clause rather than assuming fair wear and tear is excluded.
