Lease Conveyancing Northern Beaches: Who Pays for Make-Good?

In a Northern Beaches commercial or retail lease, the outgoing tenant will often pay for fit-out removal where the make-good clause expressly requires it. But responsibility is not automatic. The lease wording, disclosure documents, condition report, fit-out approvals, assignment history and any landlord agreement to retain improvements can all change the outcome. The scope should be settled before strip-out contractors start, not during final handover.

At the end of a commercial lease, an apparently simple instruction to “make good” a tenancy can become one of the most expensive lines in the exit budget.

A Northern Beaches retailer may have installed timber flooring, partitions, lighting, counters and services. An office tenant may have inherited meeting rooms, carpet tiles and joinery from the previous occupant. A hospitality operator may have floor penetrations, drainage, refrigeration infrastructure, tiles and fixed equipment integrated into the premises.

When the lease ends, the central question is rarely whether something can physically be removed. It is who is contractually responsible for removing it, how far the reinstatement must go, and what condition the landlord is entitled to receive.

NSW Small Business Commissioner guidance explains that make-good provisions can require premises to be returned to a similar condition to the commencement of the lease or, in some cases, stripped back to base-building or bare-shell condition. It also recommends documenting fit-out and make-good obligations clearly before a lease is signed.

The Expensive Word Is Not “Strip-Out”. It Is “Condition”

A contractor can price demolition. What the contractor cannot decide is the legal standard of handover.

Instructions such as “remove the fit-out”, “return to original condition”, “make good all alterations” and “reinstate the premises” can describe materially different outcomes.

One scope might require only tenant furniture and loose fixtures to leave the property. Another may require partitions, flooring, ceilings, signage, cabling and joinery to be removed. A more extensive obligation may require the tenancy to be returned to base-building condition, including treatment of the concrete slab after flooring removal.

That distinction is particularly important where commercial flooring removal and substrate preparation are involved. Removing carpet tiles is different from removing the adhesive below them. Taking up engineered timber is different from grinding the slab beneath it. Removing partitions is different from repairing anchors and floor channels afterwards.

A lease review therefore needs to identify the required end condition before physical work is scoped.

Who Normally Pays for Make-Good Work?

In many NSW retail and commercial leases, the tenant bears make-good costs where the lease places that obligation on the tenant. NSW Small Business Commissioner guidance notes that tenants are likely to bear the cost of removing their fit-out at the end of a lease.

That should not be converted into a blanket rule. Responsibility still turns on the documents and circumstances of the particular tenancy.

Tenant installed the fit-out during its lease

• Typical issue to resolve: Whether the lease requires removal and reinstatement.
• Documents that matter: Lease, approved fit-out drawings and landlord consent.

Tenant inherited an existing fit-out

• Typical issue to resolve: Whether the tenant assumed responsibility for earlier works.
• Documents that matter: Lease, assignment deed, condition report and disclosure material.

Landlord wants part of the fit-out retained

• Typical issue to resolve: Whether the original make-good requirement has been varied.
• Documents that matter: Written landlord agreement, surrender deed and side agreement.

Removal exposes damaged or uneven concrete

• Typical issue to resolve: Whether it is tenant damage, pre-existing condition or ordinary substrate condition.
• Documents that matter: Commencement photos, reports, fit-out records and lease repair clauses.

Parties agree on cash instead of physical reinstatement

• Typical issue to resolve: How the payment is calculated and what obligations it settles.
• Documents that matter: Settlement agreement, deed of surrender and quantity-surveyor assessment.

Legacy hazardous materials are discovered

• Typical issue to resolve: Who manages the immediate safety response and who ultimately bears contractual cost.
• Documents that matter: Asbestos register, reports, WHS records and lease provisions.

The Inherited Fit-Out Problem

One of the most difficult make-good scenarios occurs when the outgoing tenant did not install everything now occupying the tenancy.

A business may have taken an assignment of an existing lease and accepted a previous operator's flooring, partitions, lighting or mechanical services. Several years later, the landlord may expect the entire tenancy to be returned to an earlier base-building configuration.

The relevant benchmark may therefore be older than the outgoing tenant's occupation.

NSW Small Business Commissioner guidance specifically warns that a tenant taking over an existing lease may face an end condition different from the state of the premises when that tenant took possession.

This is why Northern Beaches lease and conveyancing review should look beyond the final year of occupation. The assignment documentation, original lease, variations, commencement condition report and fit-out approvals may all be relevant to understanding what was actually assumed.

What If the Landlord Wants to Keep the Fit-Out?

Make-good obligations are sometimes overtaken by commercial reality.

A landlord preparing a Brookvale showroom, Manly retail space or Dee Why office for the next occupant may decide that removing a quality ceiling, lighting system, flooring installation or partition layout makes little economic sense.

An incoming tenant may even want those improvements.

That does not mean the outgoing tenant should simply leave them behind.

Retention should be documented. The written agreement should identify exactly what the landlord accepts, what must still be removed, and whether acceptance of retained items fully discharges the tenant's original make-good obligations for those items.

Otherwise, an informal instruction such as “leave the floor” can create a disagreement later when the final inspection considers skirtings, adhesives, penetrations, damaged finishes or related services.

Why Flooring Often Becomes the Make-Good Dispute

Floors expose the difference between removing an improvement and restoring the premises.

Consider a retail tenant that removes vinyl planks. The boards are gone, but pressure-sensitive adhesive remains across 180 square metres. Or a tenant removes direct-stick engineered timber, exposing hardened adhesive ridges and areas where earlier levelling compound has broken away.

Is the floor “removed”?

Physically, yes. Contractually, perhaps not.

Elyment has separately examined the operational problem created when a commercial tenant leaves adhesive contamination after flooring removal. The lease question sits one stage earlier: who was required to deliver the clean slab or base-building condition in the first place?

Depending on the documented standard, the physical works may extend through:

• carpet or carpet-tile removal;
• vinyl, timber or tile removal;
• skirting and trim removal;
• adhesive scraping or mechanical preparation;
• concrete grinding;
• removal of anchors and floor fixings;
• localised concrete repairs;
• floor-levelling assessment;
• painting or wall reinstatement; and
• final cleaning and documented handover.

The scope should distinguish between a lease-compliant make-good floor and an installation-ready floor for the next tenant. They are not necessarily the same specification.

A Cash Settlement Can Replace the Physical Make-Good

The tenant does not always have to perform every item of work itself.

NSW leasing guidance recognises that landlords and tenants may agree to a payment in lieu of make-good, allowing the landlord to undertake the works after possession is returned.

This can be commercially useful when the landlord intends to refurbish immediately, combine tenancies, alter the layout or prepare the premises for a specific incoming occupier.

But a cash settlement should define what the payment resolves.

A negotiated amount without a clear release can leave the outgoing tenant exposed if further demolition, repair or delay costs are later claimed.

For higher-value reinstatement scopes, an independent quantity surveyor may also become relevant. NSW Small Business Commissioner guidance notes that retail leases sometimes contain mechanisms for an independent certified quantity surveyor to determine disputed make-good costs.

Do Not Start Demolition Until the Scope Has Been Frozen

The strongest operational control is a documented pre-strip-out inspection involving the people who can actually approve the outcome.

1. Read the lease and every relevant variation. Identify make-good, repair, alteration, reinstatement, surrender and landlord-consent provisions.
2. Review the commencement evidence. Compare the condition report, photographs, fit-out plans and any earlier landlord works.
3. Identify inherited improvements. Check assignment documents and determine whether earlier fit-out obligations were transferred.
4. Complete a joint site walk-through. Mark each major element as retain, remove, reinstate or investigate.
5. Define the floor endpoint. State whether flooring removal ends at uplift, adhesive removal, clean slab, repaired slab or another measurable condition.
6. Confirm approvals and access constraints. Building management, strata, loading docks, lifts, after-hours access and council conditions can affect programme and cost.
7. Price the documented scope. Quotes should state assumptions, exclusions, disposal obligations and treatment of concealed conditions.
8. Sequence the works. Removal, grinding, patching, painting, services and final cleaning need a coordinated programme rather than overlapping trades.
9. Inspect before contractors demobilise. Resolve incomplete items while equipment, labour and site access remain available.
10. Record written acceptance. Photograph the completed premises and document landlord acceptance or outstanding items before surrender is finalised.

This is the same programme-control principle that applies to sequencing removal, grinding, levelling and installation on busy Sydney sites: unresolved scope at the start tends to become delay and variation at the end.

Northern Beaches Sites Add Their Own Delivery Constraints

Lease wording establishes responsibility, but site conditions determine how expensive that responsibility becomes.

Commercial premises across the Northern Beaches can involve shopping-centre access protocols, strata-controlled buildings, mixed residential and commercial properties, restricted loading areas, underground car parks, narrow service corridors and trading-hour constraints.

A fit-out that takes two days to remove in an unrestricted warehouse may require a materially different programme where demolition waste has to move through booked lifts, occupied common areas or controlled loading zones.

Northern Beaches Council also notes that changes to buildings may require development approval depending on the nature of the work. Where a Development Application includes demolition or construction and Council is the consent authority, its guidance requires a Waste Management Plan.

Consent conditions can also regulate construction hours. Council provides a process for applications to undertake works outside permitted hours, which may be relevant where retail or mixed-use buildings require noisy removal work to occur after trading.

This means the legal question “who pays?” cannot always be separated from the operational question “what will it actually take to complete the work?”

Legacy Materials Can Stop the Programme

Older commercial tenancies sometimes reveal unidentified flooring layers, mastics, wall linings or other materials only after strip-out begins.

That is not the time to assume an unknown material can simply be ground away.

SafeWork NSW guidance requires asbestos risks to be addressed before relevant demolition or refurbishment work. Its demolition guidance also directs duty holders to check the asbestos register or arrange appropriate inspection where required before work starts.

Concrete grinding creates a separate dust-management issue. SafeWork NSW identifies concrete as a material that can contain crystalline silica and emphasises controls such as dust capture, ventilation or water suppression where applicable.

The NSW EPA also treats flooring, concrete, timber and other removed construction materials as part of the construction and demolition waste stream and encourages project managers to understand how contractors handle and dispose of that waste.

Contractual responsibility for the cost of a newly discovered condition may need legal analysis. Immediate workplace safety duties, however, should not be postponed while the parties argue about the final invoice.

Retail Leases Need an Extra Document Check

Retail leasing introduces another layer because disclosure material and fit-out documentation can sit alongside the lease itself.

NSW Small Business Commissioner guidance says shopping-centre tenants should receive information about required fit-out standards. It also notes that refurbishment or refitting obligations need sufficient detail about the general nature, extent and timing of the required work if they are to operate as intended.

For an outgoing retailer, the practical file may therefore extend beyond the signed lease to:

• the lessor disclosure statement;
• tenant fit-out guides;
• approved construction drawings;
• landlord fit-out approvals;
• condition and dilapidation reports;
• lease variations;
• assignment documents;
• side agreements and incentives;
• correspondence approving retained improvements; and
• any deed governing surrender or early termination.

Elyment's broader property law and conveyancing pathway is relevant where contract wording, property obligations and operational delivery need to be reviewed together rather than treated as disconnected tasks.

The Handover Date Is a Commercial Deadline, Not Just a Lease Date

A late make-good can affect more than the outgoing tenant's contractor bill.

If the landlord cannot accept the premises, the dispute may affect surrender timing, security arrangements, incoming fit-out access and the next tenant's programme.

The greatest risk often appears when the lease expires on Friday and the incoming contractor is scheduled to start on Monday.

Discovering on Friday afternoon that the landlord expected the floor to be ground, partitions patched and services capped is not a construction problem that began on Friday. It is a scope-definition problem that began weeks or months earlier.

Strong project delivery therefore works backwards from the agreed possession date:

• final landlord inspection;
• defect and completion buffer;
• final cleaning;
• painting and patching;
• floor grinding or substrate treatment;
• fit-out demolition;
• service isolations;
• building-management approvals;
• contractor mobilisation; and
• legal confirmation of the make-good scope.

The Most Valuable Make-Good Decision May Be Made Before the Lease Is Signed

Make-good exposure is easier to negotiate before a tenant has committed to the premises than several years later when the exit deadline has arrived.

Before entering a lease, a tenant should understand not only the rent and incentive package, but the cost of eventually dismantling what it is about to build.

That may justify negotiating:

• a defined make-good standard;
• a schedule of landlord-owned items;
• permission for specified fit-out elements to remain;
• a photographic commencement record;
• limits around inherited works;
• a pre-agreed valuation mechanism; or
• a right to negotiate payment in lieu of physical reinstatement.

Those provisions do not eliminate every end-of-lease dispute, but they significantly improve the quality of the evidence available when the final scope is being determined.

Review the Make-Good Scope Before Strip-Out Starts

Align the lease obligations, fit-out history, removal scope, compliance requirements, contractor sequencing and handover programme before physical works are locked in.

Request a Lease & Project Review

What Northern Beaches Landlords and Tenants Should Take From This

The party paying for a fit-out strip-out is determined by the lease and related agreements, not simply by who installed the most visible finishes.

For Northern Beaches commercial and retail premises, a defensible make-good process starts by establishing the required handover condition, tracing who is responsible for each improvement and translating that legal obligation into a measurable physical scope.

Only then should contractors price demolition, flooring removal, adhesive treatment, concrete grinding, repairs, painting or reinstatement.

The more complex the premises, the more important that sequence becomes. A fit-out may have accumulated over several tenants, several lease variations and several refurbishment cycles. Unless the documentary history and site condition are reconciled before work begins, the outgoing tenant and landlord may discover they have priced entirely different versions of “make good”.

This article provides general NSW property and project information and is not a substitute for advice on the wording of a particular lease or dispute.

Sources and References

• NSW Small Business Commissioner: Make-good and commercial leasing guidance
• NSW Small Business Commissioner: Retail leasing, fit-out and disclosure guidance
• Northern Beaches Council: Development approval and demolition requirements
• Northern Beaches Council: Waste Management Plan requirements
• Northern Beaches Council: Construction working hours and out-of-hours works
• SafeWork NSW: Asbestos and demolition guidance
• SafeWork NSW: Crystalline silica guidance
• NSW Environment Protection Authority: Construction and demolition waste guidance
• Elyment: Flooring Removal and Substrate Preparation
• Elyment: Northern Beaches Lease and Conveyancing Review
• Elyment: Commercial Tenant Flooring Removal and Adhesive Contamination at Make-Good
• Elyment: Sequencing Removal, Grinding, Levelling and Installation on Busy Sydney Sites
• Elyment: Property Law and Conveyancing