The latest amendments to the ‘Law on Construction’ take full effect in 2024 and bring with them material changes to construction projects
Amendments to the ‘Law on Construction’, adopted at the end of 2023, will fully come into force in 2024. The main material changes will affect construction permit processes and will be effective from 1 November 2024. For one thing these changes will affect only projects which launch after this date and which will mainly have an influence on the real estate developers.
Additionally, overshadowed by these modifications are other significant amendments which also become effective from the beginning or middle of this year. The primary goal behind these changes is to enhance safety, quality, and transparency within the construction process.
This is first done through the requirement for the compulsory registration of all contractors or subcontractors in the public information system, ‘Infostatyba’ (or the integrated construction journal). This requirement makes it practically impossible to involve contractors in construction projects without having received full disclosure. The aim is to promote transparency and restrict entry for unlicensed construction participants. It also has an impact upon the potential participation of foreign and/or EU construction companies in the local market. It is a long-established rule which dictates that entities which are licensed in their respective countries must undergo a construction-related rights recognition procedure before being able to commence operations on Lithuanian construction sites. Following the establishment of the requirement for contractors to register, this will mean that aligning their participation under the ‘wing’ of a locally-licensed company will become, if not impossible, at least much riskier, especially for the local company itself.
The risk factor is heightened by a second batch of amendments, which establish the unequivocal authority of the ‘State Territorial Planning and Construction Inspectorate’ when it comes to being able to suspend licenses (attestations) for companies and individuals in the case of there being a violation of any construction regulatory legal acts. Such suspensions were also previously possible, but were also more theoretical and complicated. Now this threatens to become a straightforward process.
For construction participants, involving local contractors, subcontractors, and foreign and/or EU companies, the implications are significant.
Locally-licensed contractors face increased scrutiny when choosing and monitoring subcontractors in order to ensure continuous licensing throughout the construction project.
Foreign and/or EU companies which hope to be able to work within the Lithuanian construction market are being incentivised to follow the licensing/recognition process rather than relying on structures which may cover their activities through the use of a local company’s licence. From an economic standpoint, this necessitates the inclusion of time and resource expenses which are related to the process of obtaining local licensing/rights recognition in project estimates.