Commercial Security Deposits and Guarantees in Bahrain

In the Bahraini commercial sector (like major malls and office towers in Manama and elsewhere), a one-month deposit is not considered sufficient as a general rule. The risks associated with corporate bankruptcy, massive cooling bills, or destroying decorations upon departure compel landlords and real estate institutions to adopt more robust credit solutions.

Disclaimer: This guide provides general legal information for educational purposes only and does not constitute legal advice. Banks can liquidate letters of guarantee strictly based on the beneficiary landlord's request. Consult a lawyer in Bahrain to draft the commercial contract. Information last verified: March 2026.

Commercial Guarantee Mechanisms Applicable in Bahrain

Since the law does not set a mandatory ceiling for commercial guarantees, real estate management companies resort to one of two ways:

1. Cash Deposit (Direct Guarantee)

The landlord requests a cash deposit equal to (two or three months' rent) that remains frozen as a guarantee until the shop is vacated. It is refunded after deducting EWA settlement bills and verifying the tenant has completed contractual works and handed over the shop in its original condition (Make-Good).

2. Bank Guarantee Letter

The most reliable and common method for large global retail companies in malls. The local bank issues a financial letter in favor of the landlord equivalent to 3 to 6 months' rent. If the company defaults on rent payment or is absent and evacuates the shop, the landlord liquidates the guarantee directly from the bank to compensate their loss without immediately resorting to rental courts.

"Key Money" (Payments to Assign the Commercial Activity)

One of the arguably contentious issues in Bahrain is the issue of "Key Money" (payments to secure a vital store).

• Legally and officially, contemporary lease law criminalizes or at least does not protect the landlord's exploitation of the tenant by demanding astronomical figures just to open the door "upfront".
• However, what applies in commercial custom is a current tenant (owning a cafe, for example, and wanting to leave) assigning the lease contract for the activity, license, and decoration to a new tenant in exchange for financial compensation called locally "selling the goodwill" (Selling Al-Jadak) or transferring the activity, and this is typically done with a tripartite agreement including the landlord's consent.

Account Settlement and Final Clearance

For a commercial company to recover its full deposit from the mall owner, real estate companies stringently demand a series of Clearances, most importantly:

• A paper for liquidating the activity and striking off the shop's address from the Commercial Registration at the Ministry of Industry and Commerce.
• A final clearance by reading and settling Electricity and Water Authority (EWA) bills.
• A safety certificate from the Civil Defense in Bahrain stating no tampering occurred to internal fire systems.

The Landager system offers you instant management of all incoming commercial guarantees. You can hold the balance as a deposit on the system and not release it financially until your employees complete a Make-good Checklist from within the Landager app, ensuring the company has not left any bills or damages behind.

Back to Bahrain Commercial Laws Overview.