Flexible workspace has become the default choice for growing London businesses, and it is easy to see why. You sign a short, simple agreement, move into a fitted studio, and scale your space up or down as the team changes. There are no lengthy negotiations, no twenty-year commitment, and no dilapidations survey to worry about on day one. But there is a cost that rarely appears in the glossy brochure or the monthly licence fee, and it tends to surface at the worst possible moment: the make-good bill you face when you hand the space back.
For many occupiers, the first time “office make-good” or “reinstatement” enters the conversation is a few weeks before move-out, when the operator sends a schedule of works or a final account. By then the budget for the year is set, the deposit is spoken for, and the new office is already draining cash. This article explains what these obligations actually are, why flexible-office tenants get caught out, what drives the cost, and, most importantly, how to budget for it long before you give notice.
What “make-good” actually means
Make-good (also called office reinstatement or dilapidations) is the obligation to return the space to the condition it was in when you took it. In practice that usually means undoing the changes you made and repairing the wear you caused, so the operator can re-let the studio to the next occupier. It is the flexible office equivalent of dilapidations in a traditional lease: the difference is simply the paperwork it sits behind.
The obligation is defined by your agreement, not by goodwill. Even a two-page licence will typically require you to remove your alterations and additions, make good any damage, clear the space of your belongings and waste, and often redecorate. The phrase “good and tenantable repair” or “the condition at the licence commencement date” is doing a lot of quiet work in those clauses, and it is the yardstick against which your final account will be measured.
Why flexible-office tenants get caught out
Traditional leaseholders expect dilapidations. They negotiate a schedule of condition at the start, budget for repairs across the term, and often instruct a surveyor a year before expiry. Flexible office occupiers rarely do any of this, for three reasons.
- The agreement feels informal. A short licence reads like a membership contract, so the reinstatement clause is easy to skim past. The commitment is real even when the document is short.
- The space was already fitted. Because you moved into a finished studio, it is tempting to assume you can simply move out of one. But anything you added—partitions, extra data cabling, a kitchenette, wall graphics, air-conditioning units, additional power—can fall to you to remove.
- Churn is fast. Flexible terms are often one to two years, so exits come round quickly and frequently. A cost you could have spread over a long lease lands in a single quarter instead.
The result is a predictable surprise. The space that took a weekend to occupy can take real money to vacate, and the bill arrives when you are least prepared for it.
What you are likely to be liable for
No two agreements are identical, but the cost of making good an office almost always comes from the same handful of drivers. When you review your own licence, look for anything that touches the following:
- Alterations and partitioning – removing meeting-room walls, glazed partitions or mezzanines you installed, and reinstating open-plan space.
- Data and electrical works – stripping out additional cabling, comms racks, extra sockets and any supplementary power or lighting you added.
- Kitchens and breakout areas – removing tea-points, plumbing and joinery that were not there when you arrived.
- Branding and finishes – taking down signage, vinyls and wall graphics, filling and making good, and repainting to the original scheme.
- Flooring and general wear – replacing damaged carpet tiles, repairing scuffs, and remedying anything beyond fair wear and tear.
- Mechanical services – disconnecting and removing any air-conditioning or ventilation you introduced, and reinstating the base configuration.
- Clearance – removing all furniture, IT and waste, which for a busy studio is rarely a trivial line item.
Two words are worth watching in every agreement. “Fair wear and tear” can be your friend, because it may excuse ordinary use; but many flexible agreements limit or exclude it, so do not assume it applies. And “reinstatement to the commencement condition” can be far more onerous than “repair,” because it can require you to undo improvements the operator was perfectly happy with.
So how much could it cost?
There is no single figure, and anyone who quotes one without seeing your space and your agreement is guessing. Cost of office reinstatement depends on how much you changed, the size and specification of the studio, the operator’s standards, and how much needs redecoration. As a planning rule of thumb, reinstatement is often budgeted on a rate per square foot, and for a lightly altered studio the sum can be modest, while a heavily fitted floor with partitioning, services and branding can run into the tens of thousands of pounds.
The point is not the precise number, it is that the number is rarely zero. Treating make-good as a foreseeable cost of occupation, rather than an unexpected penalty, is what separates a smooth exit from a stressful one. Even a conservative provision set aside each year turns a nasty quarter-end shock into a line you have already funded.
The licence-versus-lease trap most occupiers miss
There is an important legal nuance that works in favour of many traditional tenants but may not protect flexible occupiers. Where premises are held under a lease, Section 18(1) of the Landlord and Tenant Act 1927 caps a landlord’s dilapidations damages at the amount by which the disrepair has actually reduced the value of their interest. That statutory cap can significantly reduce what a leaseholder ultimately pays.
Flexible space is frequently granted by way of a licence or a very short contractual arrangement rather than a lease, and the protections that apply to leases do not automatically carry across. In some cases an occupier can therefore face a reinstatement claim assessed on the cost of the works themselves, without the same statutory backstop. Whether that is the case for you depends entirely on the wording and legal nature of your agreement, which is exactly why it is worth having it reviewed rather than assumed. We are not solicitors, and this is general information rather than legal advice, but it is a distinction that can materially change your exposure.
How to budget for make-good before you move
The good news is that make-good is one of the most manageable costs in a business, precisely because it is foreseeable. A little discipline at the right moments removes almost all of the risk.
- Read the exit clause on day one. Before you sign, find the reinstatement, redecoration and clearance obligations and understand exactly what “handback condition” means for your studio.
- Record the starting condition. Take dated photographs and, ideally, a short schedule of condition when you move in. Evidence of how you found the space is your best defence against being charged for pre-existing wear.
- Keep a fit-out file. Every time you add a partition, run cabling or install a kitchenette, note it. Your alterations list is your future removals list, and having it saves guesswork and money later.
- Provision annually. Set aside a realistic sum each year rather than facing the whole cost in one quarter. A cost you have already funded is not a shock.
- Get advice before you give notice, not after. A specialist review a few months ahead of exit lets you plan works, challenge anything overstated, and often reduce the final figure—options that largely disappear once notice is served and the clock is running.
Where a dilapidations specialist adds value
Operators and their surveyors prepare exit accounts for a living, and they will present the claim in the way that best protects the building. Most occupiers, understandably, have never handled one and accept the figure at face value. That is where an independent view pays for itself. A specialist can test whether the works claimed are genuinely your responsibility, whether “reinstatement” is being applied more widely than the agreement requires, whether fair wear and tear has been properly credited, and whether the costings are reasonable. On many exits the result is a lower, better-evidenced settlement and a far calmer handback.
At London Dilaps we advise occupiers across the capital’s flexible workspace buildings on exactly this, from reviewing a licence before you commit, to negotiating the make-good account when you leave. If you are within twelve months of a move, or simply want to know what your current agreement could cost you to exit, we would be glad to take a look. Get in touch at londondilaps.com for a no-obligation conversation.
The flexible office gives you freedom on the way in. A little planning makes sure it does not cost you on the way out.