Should landlords accept exclusivity, bank guarantees or turnover rent?

Each of these can be safe for a shoplot owner, but only in a limited form. Exclusivity is fine if it covers only units you own, names the competitors, and ends when the tenant stops trading or defaults. A bank guarantee can be as good as cash if it is payable on demand, issued by a licensed bank and outlasts the tenancy. Turnover rent is the weakest: accept it only as an extra on top of a full base rent, never in place of one. The brand's side of the same questions is in exclusivity, bank guarantee and turnover rent for tenants.

This is general information, not legal advice. Have your lawyer draft these clauses.

It can be worth it if the chain is the tenant you want for years. The question is what it costs you. If you own one unit, an exclusivity clause costs almost nothing, because there is no other unit to restrict. If you own several units on the row, it limits who you can let them to, and in a hub where coffee or bubble tea brands are bidding against each other, that can cost real rent.

• Your units only. You cannot promise anything for neighbours, so do not.
• Named brands or a tight trade. "Specialty coffee chains", not "food and beverage".
• Falls away automatically if the tenant stops trading, is in arrears, assigns the tenancy or does not renew.
• No damages. Limit the tenant's remedy to a rent reduction or ending the tenancy.
• Existing tenants excluded, including their renewals.

Ask for a higher rent or a longer committed term in return. Exclusivity has value, and chains know it.

It can be safer than cash in one way: the bank pays even if the tenant has run out of money. It is less safe if the wording is weak or the guarantee expires before you need it. Malaysian courts rarely stop a call on an on-demand guarantee: the Federal Court in Sumatec v Malaysian Refining Co (2012) required a strong prima facie case of fraud or unconscionability. That is what makes the on-demand form worth insisting on.

Checklist before you accept one:

• On demand, not conditional on proving loss
• Issued by a licensed bank in Malaysia
• Amount equal to the cash deposit it replaces
• Valid until several months after the tenancy ends, with a duty to renew
• A right to call it in full if the tenant fails to renew it on time
• Utility deposit still paid in cash

The usual cash standard is 2 to 3 months' rent plus a 1 month utility deposit (SPEEDHOME). See shop rental deposits, and if a tenant does default, what a landlord can legally do.

Usually not on its own. Malls make it work because they can audit sales and spread risk across hundreds of tenants. Sunway REIT's CEO told EdgeProp its malls take base rent or a share of sales, whichever is higher, and Pavilion REIT's variable lease income was about 7% of gross rental income in FY25 (The Star, 11 May 2026). The base rent carries the mall; the turnover part is a bonus.

For a private owner the risks are clear:

• you cannot easily verify sales, especially with delivery app orders
• a weak store pays you less exactly when you most need the rent
• a valuer or bank values your shop on secure rent, not on a sales share

If the chain will not pay a market base rent, the turnover offer is usually a sign the store's sales cannot carry your rent. Check what the market pays on the shop rent index and in our guide to how much rent to ask.

Say yes when the tenant is strong, the clause is narrow and you are paid for the risk. Say no when it replaces rent, deposit or flexibility you would otherwise keep. Our guide to chain brand or independent tenants covers the bigger choice, and our landlord page explains how we vet brands before they reach you.

Written by Tok Ginstee (REN 37505), CID Realtors Sdn Bhd (E (1) 1855). Updated November 2026.