Shop leases, office leases and commercial leases generally have 'make good' covenants which require the tenant to paint (normally in white), and to repair (to hand-over condition) the interior of the premises.

The ‘make good’ covenant for painting applies at the end of each term of the lease. An option term is a new term.

Mostly, it is the tenant's responsibility to repaint, but in the case of the Albury Townhouse Motel the landlord included the cost to repaint in the rent and took on the obligation itself. It's not known why the landlord did so, but the large amount of face brick on the outside and inside of the building might provide a hint that there was not much painting to do.

In any event, the landlord of the Albury Townhouse Motel did not repaint the Motel at the end of the five year term (it kept the money instead). The tenant decided to sue the landlord to recover the cost of the painting so that it could pay for the painting itself.

The landlord argued all the way up to the Court of Appeal in the NSW Supreme Court that because the painting had not been done, the tenant's claim must fail.

The Court of Appeal upheld the tenant's claim and entered judgment for $54,952.09 plus legal costs, saying that it did not matter that the painting had not been done.

Applying that finding in reverse, it is always smarter for a tenant to repaint the premises before they move out, than face a hefty bill from the landlord for repainting and making good.

For a full analysis of that decision, click