The transition at the end of a commercial leasing arrangement in Victoria can be one of the most complex stages of the landlord–tenant relationship. A make good clause in Victoria sets out how the premises must be returned to the landlord and is often a source of dispute and unexpected cost.
Many tenants assume that leaving a property tidy and “swept clean” is sufficient. In reality, leases often contain detailed requirements that can range from minor repairs to the complete removal of an expensive office fit-out.
This article outlines general principles of a make good clause in Victoria in Victorian commercial and retail leases. The exact legal position will always depend on the wording of your lease and whether the Retail Leases Act 2003 (Vic) applies.
What is a Make good Provision?
“Make good” refers to the contractual obligation to return a property to a particular state at or after the expiry of a lease. Disputes can arise over whether the tenant must:
- Simply repair damage and leave the premises in a clean and functional condition; or
- Reinstate the premises to an earlier “base building” or “original” condition.
The answer almost always depends on:
- The precise wording of the lease (including any schedules, plans and definitions);
- Any applicable legislation (for example, the Retail Leases Act 2003 (Vic) for retail premises); and
- The evidence of the premises’ condition at the start and end of the lease.
Reinstatement vs Repair: Make good clause Victoria obligations
While every contract is different, obligations generally fall into two broad categories.
Repair obligations
A repair obligation usually requires the tenant to fix damage that occurred during the tenancy and leave the premises in the condition required by the lease (for example, “good and tenantable repair” or “good repair and condition”). These clauses commonly exclude liability for “fair wear and tear”, although what is “fair” can be contested.
Reinstatement obligations
A reinstatement obligation is typically more extensive. It may require the tenant to remove some or all of its fit-out (for example, partitions, cabinetry, floor coverings and signage) and to return the premises as close as practicable to a defined earlier state. That baseline may be described as:
- Base building condition;
- Original condition; or
- The state of the premises as at the lease start date or in an attached condition report or plan.
Because seemingly small changes in wording can have large cost consequences, tenants and landlords should obtain legal advice before assuming what their make good clause in Victoria requires.
Special Note for Retail Leases in Victoria
If your lease is a retail lease covered by the Retail Leases Act 2003 (Vic), additional rules apply.
- The landlord must provide a disclosure statement before you enter into the lease.
- That disclosure statement should clearly set out any key make good and end of lease obligations, including any requirement to refurbish or refit the premises at the end of the term.
- If important make good requirements were not properly or clearly disclosed, you should obtain legal advice promptly.
Whether your premises are “retail premises” under the Act is a technical question and should be assessed on your specific circumstances. You can find more information on retail guidelines via the Victorian Small Business Commission.
Understanding “Fair Wear and Tear” in a make good clause Victoria lease
The law recognises that a property will naturally deteriorate over time. “Fair wear and tear” is usually understood to mean deterioration caused by:
- Reasonable use of the premises; and
- The ordinary operation of natural forces such as sunlight, time and normal weather conditions.
By contrast, damage caused by misuse, neglect or failure to maintain equipment is unlikely to be “fair wear and tear”.
Example scenarios:
- Fair wear and tear:
- Carpet fading from ordinary foot traffic.
- Minor scuff marks on walls from day-to-day use.
- Aging air conditioning components that have been properly serviced.
- Tenant damage:
- Paint or chemical stains from spills.
- Broken fixtures or shelving from improper use.
- Equipment failure caused by not servicing plant and equipment as required under the lease.
Because disputes often turn on fine factual distinctions, careful record-keeping by both parties is essential.
The Importance of an Initial Condition Report
If a make good clause Victoria dispute escalates to a formal process (for example, negotiation through lawyers, mediation or proceedings in VCAT), the outcome often depends on the quality of the evidence about the condition of the premises at the start of the lease.
- Detailed written descriptions of each area of the premises;
- High-resolution, time-stamped photographs and videos;
- Copies of any relevant plans, drawings and specifications.
End of Lease Planning Checklist (Make good clause Victoria)
End of lease obligations are best managed well in advance of the expiry date. Review our latest articles for further tips on lease exits.
Key Takeaways
- Make good obligations are lease-specific: The tenant’s obligations at the end of the lease depend on wording and legislation.
- Precision matters: Small drafting differences in a make good clause in Victoria can significantly change liability.
- Evidence is critical: Condition reports and records can determine outcomes in disputes.
- Plan early: Address make good obligations months before lease expiry.
If you need advice about a make good clause in Victoria, contact us on 03 9670 7440 or email [email protected].