Pre-Lease Condition Reports: The Document That Decides Your Make-Good Bill

Commercial leases in Australia almost always end with a make-good obligation, a requirement for the tenant to return the premises to a defined state. The most common dispute is what condition the premises were in when the lease began. The answer should be a pre-lease condition report.

A good condition report should be agreed and signed by both parties before the lease commences. It should document the structure, finishes, services, fit-out, and any visible defects, with photographs and locations. It should describe pre-existing damage in enough detail that "as it was at lease commencement" is unambiguous three or seven years later.

Tenants benefit because they cannot be charged for damage that pre-existed their occupation. Landlords benefit because tenants cannot deny clear pre-existing condition. Both benefit because the report shortcuts the most expensive and protracted negotiation in commercial real estate.

Retail and Commercial Leases Acts in each Australian state require landlords to provide disclosure statements before lease execution, but those statements rarely cover physical condition in any detail. A separate condition report, ideally prepared by an independent inspector, fills that gap.