Many tenants under retail or commercial leases don't realise the extent of their obligations once their lease comes to an end. De-fits and make-goods can be costly, so knowing your obligations before you sign your lease is key.
Make-good or de-fit?
Most leases say that once the lease ends, the tenant must leave the leased premises in a certain state.
There are many different terms that can be used, including 'de-fit', 'make-good', 'refurbish' or 'redecorate'. The lease will detail exactly what needs to be done. This can include one or more of the following:
- Leaving the premises clean, tidy and in good repair.
- The removal of your fixtures, fittings, signage and equipment.
- Repainting the premises and replacing floor coverings.
- Reconfiguring the premises to its original layout.
- Stripping the premises back to a bare base-shell.
Even if you've installed a $100,000 fit-out in excellent condition, you may still be required to remove it.
Landlords may sometimes allow you to leave the premises as-is, but this is not common and unless the lease says otherwise, it's the landlord's choice to make. They may be willing to grant you this concession if they believe the current fit-out is in good condition and would be a selling point to secure a new tenant. However, even though you may consider your fit-out to add value to the premises, a new tenant may want a different look and layout. This is especially so if the use of the premises may change, for example, from a café to a clothing store.
Some landlords may be willing to accept a predetermined de-fit fee and handle the works themselves, saving you from carrying out the de-fit yourself. This should be discussed well in advance though.
It's essential to engage a solicitor to negotiate your lease before you sign it. Leases are always up for negotiation and a reasonable compromise can often ...