Fit-out payment terms in Dubai: milestones that hold up

What a payment milestone should be tied to

A milestone is an event somebody can walk up to and verify. "MEP first fix complete and inspected" is an event. "End of week six" is a diary entry. Once a schedule pays on diary entries, the money and the work separate within the first month, and neither side can prove who is ahead.

Triggers that survive a site meeting name a physical state and the document that proves it:

Notice what is missing from that list: approvals. Tying a payment to "receipt of the Dubai Municipality permit" hands one party a risk that neither party controls. A clean fit-out permit submission typically comes back in ten to twelve working days, but a comment from the reviewer resets that clock, and no contractor should be paid or penalised for it. Tie the money to the submission, and handle the approval date in the programme clauses instead.

• Drawings frozen and the authority submission lodged, evidenced by the submission reference.
• Containment, ducting and pipework installed to first fix, evidenced by the consultant's inspection record.
• Joinery delivered to site and set out, evidenced by a delivery note countersigned on the floor.
• Testing and commissioning complete, evidenced by the commissioning sheets and the snag list issued to the client.

The advance, and where its ceiling sits

Mobilisation advances in the Dubai fit-out market usually land between 5 and 20 percent, with FIDIC's own standard sitting in the upper half of that band. The advance is not profit taken early. It pays for site set-up and hoarding, project insurances, landlord and building deposits, and the deposits that long-lead suppliers demand before a joinery or a bespoke lighting order enters production.

Above roughly 25 to 30 percent, the balance of risk flips. At that point the client has funded a meaningful share of the works before a single protection sheet has been laid. If a contractor asks for it, ask what committed cost it covers, and ask for the supplier quotations that create the commitment. There are honest answers to that question, mostly involving imported stone, specialist kitchen equipment or a long-lead chiller. There are also dishonest ones.

What makes an advance safe rather than alarming is recovery and security together. Recovery: under the FIDIC default the advance is amortised at 25 percent of each interim certificate, with deductions starting once certified interim payments pass 10 percent of the contract amount less provisional sums. Security: an Advance Payment Guarantee issued by a UAE bank for the full advance, reducing as the advance is recovered. If the contractor disappears, the client calls the guarantee rather than chasing a company.

A milestone map that survives a real programme

The split below reflects how commercial fit-out contracts are commonly staged in Dubai. It is a working structure rather than a rate card, and the weighting shifts with the job. An office where the MEP is a modification of existing services carries a lighter MEP stage than a restaurant where the extraction system is the single largest package.

Keep the final stage meaningful. Below about 5 percent the closing payment stops motivating anyone to chase the last twenty snags, and retention on its own rarely covers a stalled tail. On the Saudi Dates Centre unit at Dubai Hills Mall the closing weeks were mall handover conditions rather than construction, and the payment structure has to leave enough value in play to make somebody care about them. The way we sequence stages against the programme is set out in our process.

• Design freeze and authority submission, around 10 to 15 percent. Drawings issued for construction, submission lodged, procurement schedule fixed.
• MEP first fix, around 25 to 30 percent. Containment, ductwork, pipework, fire systems roughed in, all inspected before anything is closed. This is the last honest moment to check the work, and it is why the stage carries so much value.
• Finishes and joinery, around 25 to 30 percent. Ceilings closed, floors laid, joinery installed and set out.
• FF&E and specialist equipment, around 15 to 20 percent. Furniture, kitchen equipment, shopfront and signage, AV.
• Handover, around 5 to 10 percent. Snags closed, testing and commissioning complete, documentation handed over.

Inspection first, then payment

The order of events matters more than the percentage attached to it. A workable clause runs: the contractor gives written notice that a milestone is ready, a joint inspection is held within a fixed window, the milestone is signed off or a written list of outstanding items is issued, then the invoice is raised, then payment falls due within an agreed number of days.

The inspection window and the payment period after certification belong in the contract rather than left to goodwill. The inspection window is usually two or three working days from notice. The payment period after certification is commonly 14, 21 or 30 days on fit-out work. FIDIC's own default is slower, with the engineer certifying within 28 days of the statement and the employer paying within 56 days, which suits infrastructure programmes and is far too slow for a twelve-week shop fit.

The clause also needs a default in the client's direction. If the inspection is not held within the window and no written reason is given, the milestone is treated as accepted. Without that line, a client who is travelling can freeze a contractor's cash flow indefinitely without ever refusing anything.

Retention and how it gets released

Retention is a percentage held back from each certified payment, commonly 5 to 10 percent, usually capped at a stated share of the contract value so it stops growing once it reaches a sensible size. It exists to fund the correction of defects if the contractor will not come back.

The FIDIC release mechanism is worth copying because it is unambiguous. Half the retention is released on issue of the Taking-Over Certificate, and the balance on expiry of the defects notification period and issue of the Performance Certificate. What matters in that wording is that release is triggered by a certificate rather than by a date passing. A schedule that says "retention released after twelve months" with no named document leaves both sides arguing about whether the period ever started.

Write the release conditions as a list of deliverables: as-built drawings, testing and commissioning records, equipment warranties in the client's name, authority completion documents where the works required them, and the landlord's signed snag clearance in a leased unit. When those are the conditions, retention stops being a lever and becomes a checklist.

Contractors who do not want cash sitting with a client for a year can offer a retention bond instead, meaning a bank guarantee for the retention value that lets each certificate be paid in full. Clients rarely lose anything by accepting one, provided the bond's validity runs past the end of the defects period.

Defects liability, and the part no contract can shorten

The defects liability period on Dubai fit-out work is usually twelve months from handover. Retail, hospitality and high-specification projects are frequently pushed to twenty-four, sometimes across the whole works and sometimes against named elements only, such as joinery finishes, a shopfront or a specialist floor. Landlords drive most of those requests, and a fit-out manual in a Dubai mall will often set the period before the contractor is even appointed.

What the period covers is defective workmanship and defective materials. What it does not cover is fair wear, misuse, damage caused by other trades brought in later, or equipment the client supplied. Say that in the contract, because the argument in month eight is always about which category a failure falls into.

Sitting above all of it is decennial liability, now at Articles 821 to 824 of the new Civil Transactions Law, which carried over from Articles 880 to 883 of the 1985 code. The contractor and the supervising engineer are jointly liable for ten years from delivery where a building suffers total or partial collapse, or where a defect threatens its stability or safety. It cannot be contracted out of, and any clause attempting to exempt or limit it has no effect. Claims must be brought within three years of the collapse or of the defect being discovered.

Most fit-out never touches that regime, because most fit-out is non-structural. It becomes live the moment somebody cores a slab for a new riser, alters a core wall, hangs plant that the floor was not designed for, or builds a mezzanine. If your scope includes any of that, the ten-year exposure exists whatever the defects clause says, and any contractor who tells you otherwise has not read the article.

Bank guarantees, and which one protects whom

An Advance Payment Guarantee and a performance bond do opposite jobs. An Advance Payment Guarantee protects the client's advance, and reduces in value as the advance is recovered from interim certificates. A performance bond protects the client against non-performance generally, and in UAE practice is commonly issued at around 10 percent of the contract value, valid through the contract period and the warranty period that follows.

Both are normally on demand, which means the bank pays against a compliant demand and looks at the contract afterwards, if at all. UAE courts treat these instruments as autonomous and will only step in where there is fraud or manifest abuse, and then only if you move quickly. For a contractor that makes the wording of the demand conditions the single most important paragraph in the bond.

On smaller commercial fit-outs the economics often kill the idea. Banks require cash margin or a facility to issue a guarantee, and a small contractor tying up cash in a bond has less cash for your materials. A common compromise is a slightly higher retention with a firm written release condition, or a bond only against the advance rather than against the whole contract. Whichever route you take, match the guarantee's expiry to the programme plus the defects period, and write down what triggers its return.

When the client pays late

Late payment is the most common cause of a stalled fit-out in Dubai, and the remedies are more concrete than most tenants expect.

FIDIC-based contracts entitle the contractor to financing charges on unpaid certified amounts, compounded monthly, calculated by default at three percentage points above the discount rate of the central bank of the currency of payment, and payable without any need for notice or certification. Beyond interest sits the right to slow down or stop. The standard wording lets a contractor give 21 days' notice and then suspend or reduce the rate of work when a certified amount goes unpaid, and lets him terminate where certified sums remain unpaid 42 days after the due date, with time and cost recoverable either way.

The statutory backdrop moved on 1 June 2026, when Federal Decree-Law No. 25 of 2025 replaced the 1985 Civil Code. Muqawala contracts now sit at Articles 812 to 839. The payment default, previously Article 885, is now Article 826, and it dropped the old reference to customary practice. The employer pays on delivery of the works unless the parties have expressly agreed something else in writing. An employer can no longer point at what the market supposedly does to justify holding money back. Payment terms that are not written down now default against the payer, which is a good reason to write them down properly.

When the contractor misses a milestone

Delay damages should be a stated rate per day or per week, with a cap, and with a clear trigger date that moves when the client causes delay. Uncapped damages read as protection and behave as a dispute. UAE law also allows a court to adjust an agreed compensation figure so that it matches the loss actually suffered, which cuts against inflated rates and against token ones equally.

The stronger remedy is procedural. Article 818(2) of the new code lets the employer serve notice requiring the contractor to comply and correct within a reasonable period. If that period runs out with nothing fixed, the employer may rescind the contract or bring in another contractor to complete or correct the works at the first contractor's expense, and does not need a court or tribunal's permission first. That is a serious power, and it works only if the notice is served properly and the facts are documented, so keep the site records and the photographs.

Withholding money mid-project is legitimate, but the amount matters. Withhold the value of the incomplete work, not the whole certificate. A client who freezes a full payment over one unfinished item usually converts a two-week delay into a two-month one, because the contractor's suppliers stop first.

Red flags in a payment schedule

On the offices we delivered at Platinum Tower in JLT, the schedule was tied to inspected states rather than to weeks, and the effect was mostly on the arguments that never happened. Nobody debated whether the job was 40 percent done, because the ceiling was either open and inspected or it was not. If you are pricing an office fit-out, ask any bidder to send the payment schedule and the programme as one document and see whether they line up.

• More than half the contract value falling due before MEP first fix is inspected.
• Milestones described by week number rather than by a verifiable state on site.
• A closing payment under 5 percent, or no separate closing payment at all.
• Retention with no written release condition, or with no end date attached to a named certificate.
• A milestone triggered by an authority approval rather than by a submission.
• An advance requested before the contract is signed or before construction drawings are issued.
• Silence on what happens when the client pays late. A schedule that penalises only one side was drafted for one side.
• An invoicing schedule stapled to a quotation that does not match the programme in the same document. The two are supposed to be the same story, which is part of what a fit-out quotation should contain in the first place.