Bank Guarantee and Make Good: How Your Security Deposit Is Protected and Released
A bank guarantee secures your make good obligations as well as rent. Here is how the amount is set and how release actually works.
Most Australian commercial leases require a bank guarantee: a written promise from your bank that it will pay the landlord a specified amount if you default on the lease, which includes unpaid make good costs, not just unpaid rent.
How much is typical
Landlords commonly ask for a bank guarantee equivalent to three to six months' rent, sometimes including GST, or an amount specifically linked to the tenant's fit-out or make good exposure. With a bank guarantee your funds usually stay in your own account, but the bank will typically charge fees to issue and maintain it and may require its own security, such as a term deposit.
How release actually works
At lease end, the landlord checks three things before releasing your guarantee: that rent and outgoings are fully paid, that the premises has been returned in the required condition, and that make good obligations are complete. Once satisfied, the landlord should return the original bank guarantee instrument so it can be cancelled. There is no universal statutory number of days for this in a standard commercial lease, it depends on your lease wording, which is exactly why unclear leases lead to tenants chasing landlords for weeks or months after handback.
Protecting yourself
- Negotiate a clear release timeframe into the lease before you sign, not after.
- Get make good works finished and inspected well before your final rent-free period ends, not on the last possible day.
- Keep your own photographic record of the completed make good, in case the landlord's assessment is disputed.
End of lease make good timeline
Frequently asked questions
Can a landlord keep my bank guarantee if make good is not finished?
Yes. If a make good is incomplete or your lease is vague about scope, a landlord can claim outstanding rent or make good costs against the guarantee before releasing it.
How long does bank guarantee release take?
There is no fixed statutory timeframe for a standard commercial lease. It depends entirely on your lease wording and how quickly the landlord confirms your make good and outgoings are complete, which is why negotiating a clear release timeframe upfront matters.
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Sources: Sprintlaw, Bank Guarantees for Commercial Leases: What Businesses Need to Know