For many New Zealand commercial tenants, the most expensive moment in the lease is not the day they sign it. It is the day the lease ends. Make-good obligations, also called reinstatement, are the clauses that require a tenant to return the premises to a particular condition at lease end. Under the standard ADLS Deed of Lease they are routine, often glossed over at lease signing, and capable of generating bills running well into five and even six figures.
This article unpacks what make-good actually requires under New Zealand commercial leases, where the disputes typically arise, and the practical steps tenants can take, both at lease signing and at lease end, to keep the final bill within survivable limits.
What Make-Good Means Under a NZ Commercial Lease
In broad terms, make-good is the tenant’s obligation to hand the premises back to the landlord in the condition specified by the lease. Under the ADLS Deed of Lease, the standard form covers two related obligations.
The first is the ongoing repair obligation during the term, which requires the tenant to keep the premises in the same condition they were in at lease commencement, fair wear and tear excepted. The second is the lease-end reinstatement obligation, which generally requires the tenant to remove tenant fitouts, repair any damage caused by their installation or removal, and return the premises in clean and tidy condition.
Read together, these obligations can require a tenant to strip out partitions, remove signage, take up carpet, reinstate ceilings, repaint walls, remove cabling, and patch every hole left behind by their fixtures. The cost depends entirely on what the tenant installed and what the lease says about reinstatement.
The Common Sources of Lease-End Disputes
Make-good is one of the most contentious areas of commercial leasing in New Zealand, and most disputes fall into a handful of recurring patterns:
Fair wear and tear. The lease usually excepts “fair wear and tear” from the tenant’s repair obligation, but the boundary between fair wear and tenant damage is rarely defined. A worn carpet after six years of office use is a typical flashpoint. The landlord wants it replaced, the tenant says it has aged naturally.
The condition at lease commencement. The reinstatement obligation only makes sense if there is a clear record of what the premises looked like on day one. If no condition report was prepared, the parties end up arguing about whether features were installed by the tenant or were already there.
Landlord-instigated upgrades. Where the landlord installed new fixtures or carried out works during the term, who pays to remove or maintain them at lease end becomes a fight. The same applies to fitout works the landlord originally agreed in writing not to require to be reinstated.
Scope of reinstatement. Some leases require reinstatement to “the original condition” while others allow the landlord discretion to require it. The wording matters. A discretionary clause hands the landlord significant leverage at lease end.
Damages versus actual cost. A landlord is generally entitled to recover the reasonable cost of putting the premises right, not a windfall. If the landlord plans to demolish or substantially refurbish the building anyway, the tenant may have an argument that the reinstatement cost is no longer recoverable. This area has been actively litigated in New Zealand and is highly fact specific.
What to Do Before You Sign
Make-good liability is set at the lease signing stage. Once the lease is signed, the tenant is largely committed to whatever the clause says. The most useful steps to take before signing are:
Prepare a dated condition report with photos. Walk the premises with the landlord (or their agent) before fitout begins, document every wall, floor, ceiling, fixture, and surface, and attach the report as a schedule to the lease. This is the single most valuable piece of evidence at lease end and almost always saves more than it costs to prepare.
Get fitout sign-off in writing. When the landlord approves your fitout plans, get explicit written agreement on which items will need to be reinstated and which can be left in place. A simple side letter listing “items to be removed at lease end” and “items to remain” prevents a future fight about what counts as a tenant fixture.
Negotiate a fair wear and tear carve-out for reinstatement. The repair clause usually excepts fair wear and tear, but the reinstatement clause often does not. Asking for a fair wear and tear carve-out in the reinstatement clause is a common, reasonable amendment that most landlords will accept.
Cap reinstatement cost where possible. For larger fitouts, ask for a cap on total reinstatement liability or for the landlord to take the fitout in lieu of reinstatement at the end of the term. Some landlords prefer a turnkey premises and will accept this readily.
Match the reinstatement obligation to the renewal pattern. If the lease has multiple renewals, make sure the reinstatement obligation only applies once at the very end, and not at each renewal date.
What to Do 6 to 12 Months From Lease End
The other window where tenants can meaningfully manage make-good liability is in the final year of the lease. Leaving it until the last month is a common and expensive mistake. Steps worth taking early:
Re-read the lease carefully. Pay close attention to the reinstatement clause, the schedule of permitted alterations, and any side letters. Identify exactly what the lease requires you to remove and what you can leave behind.
Get an independent dilapidations assessment. A quantity surveyor or commercial dilapidations specialist can walk the premises, list everything that the lease arguably requires you to address, and give you a defensible cost estimate. This becomes the baseline for any negotiation with the landlord.
Open a dialogue with the landlord. Many landlords will accept a cash settlement in lieu of physical reinstatement, especially if they plan to refurbish or re-tenant on different terms. A negotiated settlement can be significantly cheaper than a full physical strip-out, particularly where demolition or major refurbishment is on the cards.
Document the handover. When you do hand the premises back, walk the building with the landlord, take dated photos, and request written confirmation that the reinstatement obligation has been met. Without this, claims can surface months after the lease has ended.
Why It Matters
Make-good is one of the largest, most under-anticipated liabilities in a New Zealand commercial lease. Tenants regularly underestimate the cost by a factor of two or three, and the bill arrives at the worst possible moment, when the business is already incurring the cost of relocating or winding down. The work to control that liability is mostly done at the front end of the lease, with a clear condition report, well drafted clauses, and written sign-offs on fitout. The remainder is done in the last year, with early planning and a willingness to engage with the landlord rather than defaulting to a last-minute strip-out.
Get the Lease Right at Both Ends
NZ Legal advises tenants and landlords on commercial lease negotiations, reinstatement clauses, condition reports, and end-of-lease disputes across New Zealand. If you are signing a new commercial lease or approaching the end of an existing one, talk to our leasing lawyers early. The earlier the make-good question is on the table, the more options you have to keep the lease-end bill within reach.
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