When your commercial lease is nearing its end, understanding the difference between restoration and renovation becomes critical-especially when it comes to fulfilling your make-good obligations. Many tenants and property managers are caught off guard by the scope of work required, leading to disputes, unexpected costs, and delays in lease settlements.
Research shows that over 60% of commercial lease disputes involve disagreements about end-of-lease conditions, with make-good clauses being the primary point of contention. Whether you’re restoring your premises to its original condition or simply renovating to meet lease requirements, knowing the boundaries of your obligations can save you significant time and money.
What Is the Difference Between Restoration and Renovation?
Restoration: Returning to Original Condition
Restoration is the process of returning a property to its original state, preserving its historical or existing character whilst repairing any damage. In a commercial leasing context, restoration typically means removing all alterations you’ve made during your tenancy and reinstating the premises to match the condition report from when you first moved in.
Key characteristics of restoration include:
- Removing tenant-installed fixtures, fittings, and improvements
- Repairing damage caused during occupancy
- Reinstating original finishes, colours, and materials
- Preserving the property’s heritage features (where applicable)
- Using period-appropriate or matching materials for repairs
Renovation: Modernising and Improving
Renovation, by contrast, involves updating, modernising, or improving a space to enhance its functionality, aesthetics, or value. Renovations typically introduce contemporary features and may completely transform the look and feel of a property.
Common renovation activities include:
- Installing modern fixtures and fittings
- Updating electrical and data infrastructure
- Reconfiguring layouts for better space utilisation
- Applying contemporary finishes and colour schemes
- Upgrading facilities to current standards
The crucial distinction: Restoration looks backward to preserve or return to a previous state, whilst renovation looks forward to improve and modernise.
Understanding Your Make-Good Clause
A make-good clause is a standard provision in commercial leases that outlines your obligation to return the premises to the landlord in a specified condition at the end of your tenancy. These clauses vary significantly between leases, and understanding yours is essential to avoiding costly disputes.
Types of Make-Good Obligations
Commercial leases typically include one of four types of make-good requirements:
1. Bare Shell Condition The most extensive obligation, requiring you to strip the premises completely-removing all fixtures, fittings, partitions, and improvements you’ve installed. The space is returned as an empty shell, ready for the next tenant to fit out from scratch.
2. Return to Original Condition You must restore the premises to match the condition described in your original condition report. This involves removing your fit-out, repairing damage, and reinstating original features that were present when you took occupancy.
3. Remove Detachable Property Only A lighter obligation where you remove only your moveable property (furniture, equipment, signage) and conduct basic repairs for any damage caused by the removal process.
4. Fair Wear and Tear Exception Some leases acknowledge that normal use will cause some deterioration. Fair wear and tear provisions exempt you from repairing damage that occurs through ordinary business use, provided you’ve maintained the premises reasonably.
Redecoration Clauses vs. Make-Good Clauses
It’s important to understand that many leases contain both redecoration clauses and make-good clauses-they serve different purposes:
Redecoration clauses are periodic obligations during your lease term, typically requiring: – Repainting walls and ceilings every 3-5 years – Maintaining floor finishes – Keeping the premises presentable and in good repair – Upholding appearance standards (common in shopping centres)
Make-good clauses are end-of-lease obligations that may include: – Removing all tenant improvements – Reinstating original layouts – Repairing structural damage – Comprehensive cleaning and restoration – Returning the premises to a specified condition
Asset managers and landlords expect both obligations to be met independently-completing redecoration during your tenancy doesn’t eliminate your end-of-lease make-good responsibilities.
When Does Restoration Apply to Your Make-Good?
Restoration is required when your make-good clause specifies that you must return the premises to its original condition. This is particularly relevant when:
Heritage and Character Properties
If you’re leasing a heritage-listed building or a property with protected character features, your restoration obligations may be more stringent. You may need to: – Use heritage-appropriate materials and techniques – Engage specialists for decorative plaster restoration – Restore original hardwood floors rather than replacing them – Reinstate period-appropriate fixtures and fittings
Condition Report Requirements
When your lease references a detailed condition report from the commencement date, you’re typically required to restore the premises to match that documented state. This involves: – Cross-referencing your current condition against original photographs and descriptions – Identifying all changes made during your tenancy – Planning restoration work to match original finishes, colours, and materials – Obtaining landlord approval for restoration methodologies
Structural and Layout Changes
If you’ve made significant alterations-such as removing walls, installing mezzanines, or changing ceiling heights-restoration requires: – Demolition of non-original structures – Reinstatement of original floor plans – Repair and finishing of affected surfaces – Ensuring compliance with current building codes
When Does Renovation Fit Into Make-Good?
Whilst make-good clauses typically focus on restoration, renovation work may be required in specific circumstances:
1. Upgrading to Meet Current Standards
Even when restoring premises, you may need to renovate certain elements to meet current regulatory standards: – Upgrading electrical systems to current Australian Standards – Installing compliant fire safety systems – Meeting accessibility requirements under the Disability Discrimination Act – Ensuring plumbing meets current building codes
2. Negotiated Alternative Conditions
Sometimes landlords prefer receiving upgraded premises rather than bare shell restoration. In these cases, renovation becomes part of your make-good solution: – Landlord agrees to accept renovated premises in lieu of full restoration – Tenant completes agreed renovation works as part of lease settlement – Both parties benefit from time and cost savings – Professional documentation ensures clarity and prevents disputes
Redecoration as Renovation
When your make-good clause requires redecoration rather than full restoration, you’re essentially renovating the space to present as fresh and modern: – Fresh paint in contemporary neutral colours – Refinished or replaced floor coverings – Updated lighting fixtures – General improvements to aesthetics
The Financial Impact: Restoration vs. Renovation Costs
Understanding whether you’re required to restore or renovate has significant financial implications:
1. Restoration Costs
Restoration is typically more expensive and time-intensive because it requires: – Detailed investigation to understand original conditions – Sourcing matching or heritage-appropriate materials – Engaging specialist tradespeople – More complex project management and coordination – Potential for unexpected discoveries during demolition
Industry data indicates that comprehensive restoration for commercial premises typically costs between $200-$500 per square metre, depending on the extent of changes made during tenancy and the complexity of reinstatement work.
2. Renovation Costs
Renovation costs vary widely based on scope and quality, but generally: – Standard commercial renovation: $150-$400 per square metre – High-end commercial renovation: $400-$800 per square metre – Basic redecoration and refresh: $50-$150 per square metre
The key consideration: Renovation gives you flexibility to choose specifications and finishes, whilst restoration requires matching existing standards-which may be more or less expensive depending on the original quality.
Negotiating Your Make-Good Obligations
Make-good obligations are negotiable, and savvy tenants often negotiate favourable terms before signing their lease:
At Lease Commencement
- Request clear documentation of the premises condition (photographs and detailed descriptions)
- Negotiate fair wear and tear provisions
- Clarify what constitutes “original condition”
- Seek agreement on who determines whether work is complete
- Consider negotiating a make-good contribution from the landlord for longer leases
During Your Tenancy
- Obtain written landlord consent before making significant alterations
- Document the consent conditions for any fitout or renovation work
- Keep records of all work completed and materials used
- Maintain photographs throughout your tenancy
- Consider aligning redecoration work with eventual make-good requirements
At Lease End
- Engage early with landlords and asset managers to clarify expectations
- Obtain quotes from professional make-good specialists
- Propose alternative solutions that benefit both parties
- Document all agreements in writing before commencing work
Real estate agents and asset managers confirm that tenants who engage proactively about make-good requirements typically achieve better outcomes and avoid disputes.
How NMGS Simplifies Your Make-Good Process
At National Make Good Solutions, we’ve spent more than 50 years helping commercial tenants, landlords, and asset managers navigate complex end-of-lease transitions. Whether you need comprehensive restoration to bare shell condition or targeted renovation to meet redecoration requirements, we provide complete end-to-end solutions.
Our Make-Good Services Include:
Assessment and Planning – Detailed review of your lease and make-good obligations – Comparison against your original condition report – Clear scope of works documentation – Transparent quotation with no hidden costs
Complete Project Delivery – All trades coordinated under one contract-electrical, plumbing, painting, plastering, demolition – Professional project management from start to finish – Minimal disruption to your ongoing operations – Quality assurance at every stage
Specialist Capabilities – Core drilling and structural work – Racking dismantle and removal for warehouse spaces – Line marking and removal – Heritage restoration where required – Advanced technology and networking installations
Landlord Liaison – Direct communication with landlords and asset managers – Regular progress updates and documentation – Obtaining necessary sign-offs and approvals – Ensuring complete satisfaction for all parties
We understand that make-good requirements can be stressful and confusing. That’s why we believe in clear communication, professional working standards, and delivering high-quality outcomes that align with your goals whilst respecting your budget and timeline.
Frequently Asked Questions
What’s the difference between a make-good clause and a redecoration clause?
A redecoration clause requires periodic maintenance during your lease term (typically every 3-5 years), involving repainting and refreshing the premises. A make-good clause is an end-of-lease obligation requiring you to return the premises to a specified condition, which may include removing all your fitout and reinstating the original layout.
What happens if I don’t complete my make-good obligations?
If you fail to complete make-good work, your landlord can engage contractors to complete the work and charge you for the costs-often at premium rates. You may also forfeit your security deposit, face holding over penalties for delayed vacancy, and potentially be liable for legal costs.
Do I need to remove all my fitout if the new tenant wants to keep it?
Not necessarily. If the incoming tenant and landlord agree to retain your fitout, you may be released from some or all of your make-good obligations. However, this must be formally documented and agreed by all parties before your lease ends.
How far in advance should I start planning my make-good?
Begin planning at least 3–6 months before your lease ends. This allows time to obtain quotes, secure any required permits or approvals (which may extend timelines), schedule tradespeople, coordinate with your landlord, and complete the work without rushing. For larger or more complex premises, start even earlier.
Ready to discuss your make-good requirements? National Make Good Solutions provides obligation-free quotes for all commercial and industrial make-good projects. With comprehensive end-to-end service across Melbourne, Sydney, Brisbane, and throughout Australia, we take the stress out of lease-end transitions.