Avoid the pitfalls of lease exit obligations

If you are a tenant, disputes can arise over the extent of your make good obligation at the end of your lease agreement and many organisations underestimate the requirements of the lease and the overall time and cost to implement these obligations. A make good obligation refers to the state you are required to leave the premises at the end of the term and differs for each lease agreement. Assessment and agreement of make good obligations can be perilous and costly if not managed carefully.

Understanding the intent of a lease drafted up to 12 years earlier and the changing environment of the premises, changing personnel and in many circumstances changes of building ownership, collectively can make negotiations complex.

Pepper is engaged by IAG (Insurance Australia Group) to assist with exit and make good obligations.

Fundamental to our approach has been:

  • Ongoing review of lease documentation and early identification of the financial implications of make good conditions
  • Open and early communication with the Landlord to avoid doubt as to the obligations and intent of IAG as the existing tenant, mitigating time pressure to finalise a solution
  • A sustainable outlook – avoid undertaking works where these works are likely to be removed or modified by the Landlord or an incoming tenant. This is simply wasted materials, resources and money, for no benefit
  • Delivering value for money outcome for IAG

Pepper has applied these principles to the IAG portfolio and contributed to the negotiation, settlement or completion of make good works across 10 properties totalling over 50,000m2.

If your lease is coming to an end in the next 12 months then get in touch with our highly experienced team, they can help you navigate the muddy waters of make good obligations, and sale forward into clear space.

For more information contact:

e: property@pepper.com.au
t: +612 8913 3071

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