The make-good clause is among the costliest of lease clauses. Returning the premises to the original condition in which you leased it sounds completely reasonable. However, this can also subject you to significant costs at rollover time if you don’t plan for it.

As with most lease clauses, the make-good clause is defined differently depending on the context in which it is used and the definitions given in your actual lease. Generally, it requires you to undo any alterations and return the space to its original condition at the end of the lease. However, the details of this seemingly simple clause can vary a great deal.

Alterations

First, you must understand what your lease considers an alteration. Adding personal property and making unauthorized changes to the space is usually considered an alteration. As such, you’ll need to remove your desks, chairs, computers, records and other items, as well as have a contractor come in and undo anything that you did without permission.

Some leases are less liberal, though. They might lump changes that you made to the space with the landlord’s permission along with unauthorized ones. It’s even possible that they could require you to absorb the costs of tearing out your original tenant improvements, although it’s more likely that your landlord would require you to leave them.

When you’re reviewing lease clauses, look for one that allows for normal wear and tear. A wear and tear clause allows you to return the space without fixing every minor issue. While you’ll still have to make good on removing your alterations, you won’t have to clean up every scratch and scuff. Bear in mind, as well, that the length of your stay impacts the amount of wear and tear that is reasonable. The longer you stay, the less you should have to touch up.

Preparing for Move Out

If you wait until after you’ve signed your next lease and then notify your landlord to deal with any make-good obligations, your negotiating position is weak. The sooner you can prepare for any repairs or changes, the better off you will be. Your strategy should also vary depending on what your responsibilities are under your lease clauses covering move out issues.

• Minimal repairs. If your lease requires minimal repairs, such as if any TI’s become your landlord’s property or if you made no changes to your space, any “move out” lease clauses are essentially non-factors. You will just need to remember to not remove your property and clean up after yourself.

• Restoration required of highly specialized space. When you have highly specialized space that your landlord would be unlikely to re-lease in the condition that you had it, your move out liability becomes a part of the equation. Try to get an estimate from the landlord for what he would charge to have his crew do the demolition, then find your own. Use these estimates when deciding whether to renew the space or leave for a new location.

• Restoration required of re-leasable space.  When your space is leasable in as-is condition, you end up with a negotiating chip. On one hand, your lease requires you to tear it out, but, on the other hand, your landlord would benefit from inheriting the space. In these situations, with a skilled negotiator in your corner, you should be able to, at a minimum, get any responsibilities under the make-good lease clause waived.

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