Make-Good Obligations in Medical Leases: A How-To Guide

Make-good clauses sit quietly in most medical leases until the day a practitioner decides to move on, and then they can become the most expensive sentence in the entire document. This guide walks you through exactly what make-good obligations mean for medical tenancies, when they are triggered, what reinstatement realistically involves for a specialist fit-out, and how to negotiate terms that protect your position from the moment you sign rather than scrambling at lease end.

1. Understand What a Make-Good Clause Actually Requires

A make-good clause is a lease provision requiring the tenant to return the premises to an agreed condition when vacating. In standard commercial leases this often means removing any fit-out and restoring the space to its base-build condition. Medical tenancies complicate this significantly because a clinical fit-out, plumbing for medical gases, lead-lined walls for imaging, or reinforced flooring for equipment can be deeply embedded in the building structure. The clause wording determines everything, so read it as literally as a solicitor would.

2. Identify the Trigger Points in Your Specific Lease

Make-good obligations are typically triggered at the end of a lease term, at the expiry of an option period, or on early termination, whether voluntary or not. Some leases also trigger partial reinstatement obligations if a tenant sublets or assigns to a different type of health practitioner. Review your lease for any clause that links a change in use or a change in tenancy to reinstatement requirements, because these mid-lease triggers catch many practitioners off guard.

3. Categorise What Your Fit-Out Actually Contains

Medical fit-outs are among the most complex in commercial property. A GP clinic or specialist suite commonly includes consulting room partitioning, clinical hand-wash basins, patient toilet facilities, reception counters built to specific heights, and HVAC systems configured for infection-control compliance. Veterinary clinic fit-outs add wet procedure areas, drainage, and anaesthetic gas infrastructure. Map every element of your fit-out against the make-good clause and ask which items the landlord considers tenant improvements versus building improvements, the distinction directly affects who pays for removal.

4. Obtain a Reinstatement Cost Estimate Before You Sign

Practitioners consistently underestimate what stripping out a medical fit-out costs. Removing clinical partitioning, capping plumbing, patching penetrations, and repainting to a landlord-specified standard in a mid-size medical suite is a substantial exercise. Some leases also require the tenant to restore mechanical systems to pre-lease specifications. Commission a quantity surveyor or fit-out contractor to produce a rough reinstatement estimate during lease negotiations, not as an academic exercise, but as a real number you can use to push back on unreasonable clause wording. This estimate also informs what make-good bond or security deposit is reasonable.

5. Negotiate a Monetary Settlement Option Instead of Physical Works

One of the most effective strategies available to medical tenants is negotiating a cash-in-lieu option in place of physical reinstatement. Under this arrangement, the tenant pays an agreed sum to the landlord at lease end rather than coordinating demolition and restoration works. This suits landlords who plan to re-lease to another health tenant and would simply re-fit the space anyway. Frame this in negotiations as a practical outcome for both parties, the landlord avoids vacancy during reinstatement works, and you avoid managing a construction project at the same time as a practice relocation.

6. Seek a Fit-Out Retention Clause Where the Landlord Sees Value

If your fit-out is genuinely transferable, a well-configured suite with quality finishes and compliant plumbing, negotiate a clause that allows the landlord to elect to retain the fit-out rather than require removal. Many landlords of dedicated medical buildings will prefer this outcome because re-leasing a ready-to-occupy clinical space is faster and cheaper than starting from bare concrete. The RACGP guidance on running a practice acknowledges that practice premises have genuine ongoing value, which supports your case for retention as a commercially sensible default. Draft the clause so the landlord must elect to retain within a set timeframe, with reinstatement remaining the fallback if they decline.

7. Address Make-Good in the Lease Disclosure Statement and Any Incentive Agreement

In Queensland, many medical tenancies are structured outside the Retail Leases Act, meaning fewer prescribed disclosure protections apply. This makes it even more important to address make-good explicitly in any heads of agreement or lease disclosure document before executing the formal lease. If a landlord is offering a fitout contribution or rent-free period as an incentive, confirm in writing whether that incentive affects your make-good obligations. Some landlords argue that a generous incentive entitles them to full reinstatement, a position you should push back on during heads of agreement, not after you have accepted the keys. For a broader view of how lease structures affect practitioner rights, our article on the Retail Leases Act and medical tenancies covers the disclosure framework in detail.

8. Include a Make-Good Schedule as an Annexure to the Lease

Rather than relying on subjective language about returning premises to a "reasonable" or "good" condition, negotiate a make-good schedule that is annexed to the lease and describes the required end-state precisely. This schedule should define what painting standard applies, whether carpet is replaced or professionally cleaned, what happens to fixed joinery, and who is responsible for any landlord-installed items. A specific schedule eliminates disputes at lease end because both parties can measure the actual condition against a written standard rather than arguing about what was intended years earlier.

9. Review Your Position at Each Option Exercise

Make-good obligations can shift across lease terms. When you exercise an option, take the opportunity to renegotiate or clarify the make-good clause in light of any fit-out changes made during the initial term. A practice that added an extra consulting room, upgraded its sterilisation area, or installed new signage during the first lease term should have those changes reflected in an updated make-good schedule rather than absorbed into an ambiguous original clause. The AMA advocacy and policy positions on practice sustainability reinforce the importance of practitioners understanding the full financial obligations attached to their premises, make-good is one of the most significant and most overlooked. Understanding how lease obligations compound over time also connects directly to the broader decision about whether ownership or leasing suits your practice, which we examine in our article on owning versus leasing medical property over a ten-year horizon.

Make-good clauses are negotiable at the start of a lease and far less so at the end. Practitioners who treat the make-good schedule with the same rigour they apply to rent and lease term will avoid one of the most common and costly surprises in medical real estate. The ABS health statistics confirm the continued growth of the health workforce across Australia, which means more practitioners are entering lease arrangements, and more are exposed to poorly drafted make-good terms. Med Real Estate works with medical tenants and buyers across Brisbane and Queensland to structure lease terms that reflect the real costs and complexities of clinical premises. Get in touch before you sign, not after the issue arises.

This article is general information only and does not take your personal circumstances into account. It is not financial, legal or professional advice. Seek advice specific to your situation before acting. Content is AI-generated from publicly available industry sources and may contain errors.