How Would You Bench Mark a Real Estate Make Good?

A question that many landlords and tenants ask at the end of a real estate lease 3-5 years or longer after occupation commenced, when it may better have been asked prior.

Most real estate leases will have some form of make good provision which in the majority of cases will be of a relatively generalised fair wear and tear basis however what is fair when with the passage of time the parties may not have a detailed recollection of all aspects of the property.

More rigorous clauses may also include explicit re-paint, re-carpet and similar re-decoration requirements however only addresses surfaces that were originally painted or carpeted which may not be any great extent of the building in for example an industrial context.

Additional focus may for example need to be given to final servicing or the general state of repair of the real estate plant and equipment in the context of its age, fixings to industrial floors and walls, electrical alterations and so forth.

Beyond re-painting and re-carpeting the practical steps to finalising an agreement on what the term fair wear and tear or make good means is often a negotiation based on the subjective opinions of the landlord and the tenant or with the advice of a make good consultant often brought in by one party to objectively support their subjective position.

Whether it simply be the landlord and the tenant negotiating themselves or with a make good consultant involved the process may be far more straight forward if an ingoing condition report attesting to the condition of the property were commissioned before occupation commenced. Such a report may be as simple as a photo report or as detailed as a dilapidation report.

Leasing agents, property managers, landlords and tenants can easily prepare something as simple as a photo report and associated CD containing and referencing images of all aspects of a property however commonly do not.

Better prepared lease agreements may include a provision for one party to obtain a detailed report on the condition of the premises for make good purposes with the cost of the consultant to be divided equally between the parties or as otherwise may be negotiated.

Only with a report attesting to the condition of the property at the commencement of occupation are you best prepared to determine what is required of a make good and obtaining such reports in advance should become a more common feature in real estate leases given the condition and cost implications to which landlords and tenants may be exposed.

This should also be combined with ensuring appropriately worded make good clauses within any real estate lease adequately address returning the property to the standard bench marked in any report.

For property management advice or to review appointing Property Sales and Leasing as your property manager please contact Tod Anderson on 0412 350 285.

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How Would You Bench Mark a Real Estate Make Good?