Lithuania’s construction sector has grown rapidly in recent years. According to the State Data Agency, in 2023, the volume of construction works will increase by 13.1% compared to the previous year, and in 2024, it will grow by a further 6%, reaching a value of EUR 4.7 billion.
However, these trends also mean that real estate developers are facing increasingly complex challenges: projects are ambitious, construction deadlines are tight and the legal framework is constantly changing.
Comparing the situation in major Lithuanian cities, Vilnius is the most difficult city to obtain a building permit. In the first 10 months of last year, only 5% of applicants managed to do so. Most of the projects in Vilnius were rejected due to inadequate documentation.
Rūta Petkevičienė, Head of the Design Group at VICONUS, a construction project management company, and Laurynas Staniulis, a real estate law expert at AVOCAD, a law firm, discuss the contradictory nature of the legal regulation and list the most common mistakes made by real estate developers, which cause delays in construction, and sometimes have to halt projects that are already under way.
Building permits: formally faster, in practice even more confusing
Mr Staniulis notes that the process of issuing building permits (SLDs) has systematically deteriorated in recent years, which has had a direct impact on the development of construction projects. The main reasons for this phenomenon are frequently changing, mutually inconsistent legislation and a lack of qualified specialists in the institutions responsible for issuing permits.
On 1 November 2024, a new version of the Law on Construction came into force, introducing a new procedure for issuing SLDs. While this should theoretically speed up the processes, according to experts, the results are not yet visible in practice.
“It often happens that civil servants, in order to avoid insinuations of possible corruption, especially when it comes to issues that are not very precisely regulated, tend to make decisions that are negative for business,” says L. Staniulis about how the poor legal framework is holding back real estate developers.
R. Petkevičienė points out that there are cases when building permits are rejected also due to communication problems with officials, as the possibility to directly contact the coordinating person and to present the documents of uploaded projects has been removed.
“For example, detailed results of studies are presented in an explanatory note, not in annexes that were overlooked by the conciliator. Instead of discussing or correcting the uploaded information, the application is rejected and has to be revised and uploaded again to Infostats,” says the expert.
A municipality’s decision not to issue a building permit can be appealed to an administrative court, but the case takes about two years.
“Litigation is a last resort when there are no other ways to implement a project,” says the lawyer, stressing that, unlike before, the issuance of an SLD does not confer the right to carry out construction work. Under the new legislation, the permit is followed by a second stage of the project preparation process, during which a technical working draft is prepared. Construction work is only possible once it has been concluded that the technical working draft meets the requirements set out in the Accession Conditions.
Rushed decisions turn into unexpected costs
However, building permits are often refused because of haste and mistakes made by the developers themselves, which are often programmed in the pre-construction phase.
R. Petkevičienė, an expert in construction project management, says that one of the most frequent ones is the failure to assess the infrastructure: whether it will be possible to build an access road, whether minimum distances will be maintained, whether additional easements will be needed. Another important issue is that of utilities, as ownership, capacity and connectivity are often not considered.
Other common reasons for rejections include. These include failure to submit land lease agreements, which have to be registered in the Real Estate Register, lack of consent from the co-owners, and failure to obtain electronic signatures from all project participants, as required by the provisions of the Building Technical Regulation (BTR).
“Practice shows that often developers who have not paid due attention to the design receive building permits which, at the time of selection of the general contractor or even after the start of the construction works, turn out to be technically unfeasible or too costly. Then it’s back to design review. Such situations not only waste time and increase costs, but also demotivate the team,” says R. Petkevičienė.
The project supervision expert stresses that sufficient time and attention should be devoted to the design process, to the in-depth study of the object’s features, and to the analysis and comparison of possible solutions. After all, mistakes “on paper” are not as costly as they are when construction starts.
Contracts with contractors must be precise
Both experts point out that another sensitive and common problem is the reliance of builders on the practices of contractors.
“Of course, know-how is important. However, situations are different, the legal framework is constantly changing and yesterday’s practical best practice may no longer be relevant today,” warns R. Petkevičienė.
Staniulis also identifies a frequent and huge mistake as the developers’ lax approach to signing contract agreements, which do not clearly define either quality requirements or the scope of works. “The result is lengthy disputes with expensive expert reports, which end up in the courts. All this leads to delays and rising costs,” he warns.
Therefore, to avoid such situations, it is essential to draw up clear contracts, defining as precisely as possible the scope of the work to be carried out, the quality indicators and the conditions of liability for defects. “Of course, it is impossible to avoid mistakes altogether, but good planning, a realistic budget and consistent communication help to minimise them,” says the legal expert.
Dialogue with local communities is essential for success
Even if a project meets all the legal requirements, ignoring the needs of the local community can lead to conflicts that escalate into legal disputes.
“The earlier residents are informed about the planned project and invited to comment, and the more transparent the dialogue, the more successful both sides are. For example, the reconciliation of public and private interests can also take place through infrastructure development – if the developer contributes to the creation of public spaces or amenities, the attitude of the residents becomes much more favourable,” notes Staniulis.
He is pleased that some developers are already applying this good practice by organising meetings with residents before project proposals are submitted. Such meetings help to discuss sensitive issues such as parking or preserving green spaces in advance.
“Often, municipalities become mediators in these processes, helping to find compromises between the parties. And while legal regulation is important here, open, respectful and consistent communication is equally important,” the lawyer reminds.
