Host
There’s just so much more to hear. Download our podcasts at DubaiI1038.com.
Host
Drive Live Talks Legal. Our guest today is Ludmila Yamalova from Yamalova & Plewka. Ludmila, thank you very much for joining us today. How are you?
Ludmila
Good to be here as always. Thank you.
Host
I know we say this every week, but it’s super busy. So I’m going to get straight on with some questions. Krishna contacted the show with a question about tenancy contracts, but someone else has also texted in, and I just want to ask you this one first. It says,
“So basically, they’re asking, is that clause in the tenancy contract enforceable?”
Ludmila
There are actually two clauses here.
With regards to the clause about a penalty of AED 1,000 for every week of delayed payment, it is enforceable because it is contractually agreed upon. However, the tenant can dispute it later by filing a case with the RDC (Rental Dispute Committee) and arguing that this penalty, which could be seen as liquidated damages, is disproportionate.
As for the clause about transferring legal fees onto the tenant, that is not enforceable because UAE law does not allow one party to impose legal or attorney fees on the other. Each party bears its own legal costs.
Host
Okay. Krishna has contacted the show with another question about tenancy contracts.
Krishna
My question is: I have a tenancy contract, and it’s ending on the 19th of November. I gave notice on the 30th of October because I’m being transferred to my head office in Sharjah. However, my landlord is saying I need to pay a two-month penalty, which I can’t accept. What are my options?
Ludmila
This refers to the early termination of a contract. Dubai rental laws do not include specific provisions for exiting a contract early unless it is stipulated in the contract itself.
That said, this is a timely question because today, an article in Al Emarat Al Youm quoted a judge from the RDC stating that judges may consider exceptional circumstances to allow tenants to exit contracts early, even if the contract does not include such provisions.
The three exceptional circumstances are:
- Loss of employment.
- Being transferred to a different location (as in your case).
- For corporate leases, when the company’s license is canceled.
Based on this judge’s statement, you would qualify under the second circumstance.
Host
So in this instance, Krishna’s best option would be to go to the RDC?
Ludmila
Yes, unless he can negotiate a settlement with the landlord directly, RDC would be the best route.
Host
Lots of questions to get through today, but if you’d like to ask Ludmila something, text 4001 or call 423-1010. Here’s another question:
“We have a company in a free zone and would like to open a branch under DED. What’s the process, and what activities can we practice?”
Ludmila
It is possible to set up a company under DED (Department of Economic Development) outside a free zone as a branch of your free zone company.
For example, if your free zone company is in TECOM and you want to set up a branch under DED, it can only practice activities identical to those on the free zone company’s license.
Host
What if you have a restaurant in TECOM and want to open a branch that only handles deliveries outside TECOM?
Ludmila
That’s fine, as the branch doesn’t need to perform all the activities of the main company—just one of them. If deliveries are part of the mother company’s license, the branch can focus solely on that.
Host
Here’s another business query:
“I’m an expat and want to set up a company in the mainland without a local sponsor. Is that possible?”
Ludmila
Contrary to popular belief, yes, it is possible.
An expat can set up a sole establishment or sole proprietorship in their name without requiring a local sponsor. However, they will need a local agent—an Emirati national—who does not own shares or manage the company.
The major difference is that a sole establishment does not offer limited liability. So, if someone sues your company, your personal assets could be at risk.
Host
Interesting. Let’s move on to another question about end-of-service benefits:
“What is included in the calculation? Is it based on the basic salary or the full package? Is a bonus included?”
Ludmila
End-of-service benefits in the UAE include several elements:
- End-of-service gratuity (pension equivalent).
- Notice pay (minimum one month or as per the contract).
- Arbitrary dismissal compensation (up to three months’ salary if termination is deemed unfair).
- Unused vacation pay.
- Pro rata bonus or commission.
- Return ticket to the employee’s home country.
- Relocation expenses (if agreed in the contract).
The end-of-service gratuity is calculated as 21 days of basic salary per year for the first five years, and 30 days for each subsequent year. For bonuses and commissions, courts generally use the average monthly earnings over a six- to twelve-month period.
Host
And if someone leaves mid-year, would they be entitled to a pro-rata bonus?
Ludmila
Yes, if bonuses are regularly paid, courts will calculate a pro-rata share based on the average from previous years, even if the contract states otherwise.
Host
Great insight, as always. Ludmila, thank you for joining us today!
Ludmila
Always a pleasure.
AR 
EN 
RU