Are you a landlord preparing to rent out your commercial building? Do you have a “make good” clause in your “end of lease” agreement? This clause protects you and your property against any damage incurred to your premises by the tenant.
Failing to include a make good clause can result in a massive dispute between you and your tenant when they vacate the premises.
What is a Make Good Clause?
A defits and make goods clause in your lease provides you with legal protection if your tenant decides to protest your claims of renovating or repairing the building when they make their exit. For example, if your tenant scuffs and damages the walls, ruins the carpets, or cracks the flooring tiles, a make good clause ensures that they have to cover the repair costs.
Without a make good clause, you’re responsible for covering the costs of these damages, even if you can prove the tenant was responsible. Some of the “make good terms” in your lease agreement should include the following.
Back to Base
This term often appears in commercial leases where the landlord requires the tenant to perform stripouts at the end of their lease. The tenant is responsible for removing all furnishings, fittings, and fixtures within the building or retail premises.
The terms might also include stripout and replacement of all ceiling boards and floor tiles as well, returning the premises to a shell to allow for the next tenant’s renovations.
You’ll also need to clearly define the terms of remodeling in the make good clause of your lease. For instance, you need to be specific when referring to repainting.
If you want the tenant to repaint the exterior and interior of the building, you need to specify that in the terms. If you fail to make this clear, then the tenant might refuse to do so when vacating, leaving you holding the bag.
Fair Wear and Tear
The terms of the make good clause in your lease agreement must clearly define the concept of “fair wear and tear” on the property. Most landlords overlook minor damage, such as scuffs on the floors and walls. If you want the tenant to pay for these repairs, then you’ll need to include them in this section.
Decals, Signage, and Windows
You’ll need to include terms in the make good clause that involve the removal of the company’s signage, decals, and window treatments on the property.
Ensure that you state that the tenant needs to leave the property in its original condition. Paying for removal of these elements can be costly, and without mentioning it in the make good clause, you could end up being responsible for the costs of removal.
The make good clause should also include and shop demolition requirements, to ensure the tenant returns the property to you in its original condition. These requirements might consist of stripping the floor, repairs to the foundation, and removal of any siding or walls. Make sure that you include retail demolition for the doors, entrance ways, and windows as well.
Fittings and Fixtures
You need to mention the removal of lighting, hooks, shelves, and other fixtures in the make good clause as well.
It’s critical to include these terms in the make good clause in your lease agreement. When your tenant takes occupation, make sure that they inspect the premises and take note of any previous damage or lack of removal by the previous tenant.
It’s advisable to hire a third-party contractor to assess the property before your tenant moves in. After the tenant takes occupancy, have them sign the inspection report to ensure you have evidence.