Make Good

Make Good

It’s the time of year when we all think about how to reset, tidy things up, and start fresh – which makes it the perfect time to talk about make good.

Make good has quietly become one of the most agonising components of the commercial lease cycle.

Firstly, make good has so many different names; defit, reinstatement, restoration, decommissioning, surrender condition, dilapidation…the list goes on. No wonder tenants and landlords are confused. And the less experience you have, the more confusing it gets.

Secondly, make good obligations are defined in the lease using old-school legal language. Everyone has a different view on what it means, but that’s not an excuse for landlords to demand a full refurbishment unless the lease explicitly says so. Again, without experience, it’s easy to get lost in interpretation.

Was it always this way? No. But why?

Times are tough in CRE, and landlords are fighting harder for every possible dollar. More often than not, the property manager either refuses to engage or goes silent, letting time run out and pressure build. Without the right advice or experience, tenants can find themselves on the back foot. When times are good the landlords pay less attention because the space will be leased quickly.

Recently the cost of make good has increased, a lot. The other day I heard an estimate for over $800 per metre and that was from a QS. Not long ago, the same make good estimate would have been $300 per metre. Have costs really almost tripled? That would mean a standard, generic, run-of-the-mill fitout (think most spec suites) would cost $3000 per metre – minimum. All excluding GST.

The reality is, some make good discussions are handled fairly with an agreed scope, two quotes based on that scope, and a reasonable settlement. But that is not the norm.

No wonder it’s become so agonising. In a time where tenants are trying to salvage parts of the fitout to save money, or reduce waste, you’d hope for a more balanced approach.