Things to know about commercial leases – Fit-out and make-good costs

Unlike residential leases where tenants are usually not allowed to make any changes to the property, retail leases are kind of the opposite.

While the fit-out generally has to be approved by the landlord and local council at the outset, it is the tenant’s responsibility to pay for this.

Perhaps, it is a clothing store that needs to have fitting rooms and a counter installed or it could be a café that needs to be renovated to attract customers.

The ability to fit out the premises should be included in the lease, but it is the tenant’s financial responsibility to do so.

Likewise, at the end of the lease, the tenant must pay for the premises to be restored to their original condition, which is called a make-good provision.

Of course, like all things in real estate, there is room for negotiation between the outgoing tenant and the landlord regarding this requirement.

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Jason Gwerder
Tuesday, 27 July 2021

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