Category: Construction Law

In the construction sector, it is not uncommon for work to be completed and the project to be in actual use, yet the contractor still has not received payment. The reason is that the client delays or refuses to sign the work acceptance and transfer certificate, thereby delaying final payment.

However, does such conduct mean that the contractor is left without legal protection? Lithuanian law provides a mechanism to protect a contractor who has fulfilled its obligations in good faith—the unilateral work acceptance and transfer certificate.

“A unilateral work acceptance and transfer certificate is not an exception or a loophole. It is a legal instrument designed to protect the contractor in cases where the client unreasonably delays acceptance of the work or payment. However, it may only be used in strict compliance with the requirements of the law,” notes Augustas Platūkis, a lawyer at AVOCAD.

Why is the work acceptance and transfer certificate so important?

In construction contracting relationships, the work acceptance and transfer certificate is one of the most important documents. It is this document that confirms that the contractor has delivered the results of the work and that the client has accepted them.

From this point on, significant legal consequences arise—the client is obligated to pay for the work performed, the warranty period begins, responsibility for the results of the work is transferred, and other rights and obligations provided for in the contract and by law come into effect.

Typically, such a document is signed by both parties. However, in practice, there are often situations where the client deliberately avoids accepting the work and thereby delays payment to the contractor.

How do clients delay the acceptance of work?

In practice, such situations take various forms. For example, a client:

• ignores the work acceptance and transfer certificates sent by the contractor;

• points out alleged or minor defects in the work;

• claims that not all of the work specified in the contract has been completed;

• begins to voice complaints—which had never been raised before—regarding the organization of work or safety violations;

• refuses to sign the document on the grounds that the letters of guarantee, insurance documents, or other formal documents have not yet been submitted.

In such situations, a paradoxical situation usually arises—the work has in fact been completed, but due to the client’s actions, the contractor is unable to receive the compensation to which it is entitled.

For example, according to the lawyer, the engineering systems installed in the business center are already operational, and the building’s employees use them every day; however, the client has not signed the work acceptance and transfer certificate for several weeks or even months, citing ever-changing formalities as the reason. In such cases, it is important for the contractor to know that the law provides a means to protect their right to payment.

Unilateral Work Acceptance and Transfer Certificate – Legal Protection Granted to the Contractor

The legislature has established a mechanism that protects the contractor from unfair actions by the client. However, an AVOCAD attorney warns that one must exercise one’s rights prudently and proportionately. In a case heard by the Supreme Court of Lithuania, it was determined that the work performed by the contractor had quality defects, which did not relieve the client of the obligation to accept the completed work under Article 6.694(6) of the Civil Code, as the defects could have been remedied and the client used the work for its intended purpose. On the other hand, the contractor did not exercise its right to sign the acceptance certificate unilaterally and, having assessed the client’s conduct as a material breach of contract, unilaterally terminated the contract and dismantled the work product.

The Court of Cassation recognized that, in the case at hand, the contractor failed to receive payment for the work performed not only because of the client but also because of its own actions; therefore, it ruled that the termination of the contract was unlawful.

According to Augustas Platūkis, if one of the parties refuses to sign the work acceptance and transfer certificate, a note regarding the refusal is made on the certificate, and the other party signs it. This results in a unilateral work acceptance and transfer certificate.

In practice, there is still a view that such an act has no legal significance, but this is not true.

Does a unilateral act have legal effect? “The short answer is yes. Consistent case law recognizes that a unilateral work acceptance and transfer act that has been properly drafted and submitted to the client has the same legal force as an act signed by both parties. It remains valid until a court declares it invalid,” he says.

This means that, pending a court decision, the party that has not signed the document is subject to all the legal consequences that would have arisen had it signed the document. Therefore, if the client fails to pay for work transferred by a unilateral act, the contractor has the right to file a lawsuit and seek a judgment for the debt arising from the work performed. Properly completing the unilateral handover procedure significantly increases the contractor’s chances of successfully enforcing its right to payment.

“Case law is consistent—a properly drafted unilateral work acceptance and transfer certificate has the same legal force as a document signed by both parties. Therefore, both contractors and clients should understand that refusing to sign the certificate does not, in and of itself, negate its legal consequences,” says Augustas Platūkis, a lawyer at AVOCAD.

When can a unilateral act be signed?

It is important for the contractor to understand that a unilateral act is not a means of circumventing the standard work acceptance and handover procedure. This tool may be used only in accordance with the requirements established by law.

First, the contractor must properly notify the client that the work has been completed and that the contractor is ready to hand over the results.

There are two possible scenarios:

• the client ignores the contractor's notice and fails to appear to accept the work;

• The client refuses to sign the work acceptance and transfer certificate without providing a valid reason.

In both cases, the contractor may be entitled to draw up a unilateral statement, but only if the client’s refusal is not based on grounds provided for by law.

When does the client have the right to refuse to accept the work?

The law provides an exhaustive list of cases in which a client’s refusal to accept the work is considered legitimate:

• the contractor missed the deadline for completion of the work, and as a result, the work became meaningless to the client;

• the results of the mandatory tests or control measurements are negative;

• defects in the work have been identified that cannot be remedied and that prevent the building or other result of the work from being used for its intended purpose;

• It is clear that the work has not been completed.

If the client’s refusal does not fall under any of the cases provided for by law, but the client still refuses to sign the document, the contractor has the right to sign it unilaterally and clearly note that the client refused to sign it.

Can a unilateral act be revoked?

According to the lawyer, the law ensures a balance between the interests of both parties. “If the client believes that a unilateral act was drawn up without justification, they have the right to go to court and request that such an act be declared invalid. However, it is important to note that it is the client who bears the burden of filing a lawsuit to challenge such a document,”

Thus, a unilateral work acceptance and transfer certificate is not a privilege of the contractor or a means of circumventing the client’s rights. It is a mechanism provided for by law, designed to ensure the fair performance of the contract and to protect the contractor from unjustified refusal to accept the work and artificial delays in payment.

Disputes over the costs of repairing common areas in apartment buildings often go beyond the mere issue of debt. Arguments frequently raised in court concern procurement procedures, the organization of tenders, the contractors selected by the homeowners’ association or the building manager, the reasonableness of work prices, or even payments to the companies that performed the work. However, a recent ruling by the Vilnius Regional Court shows that in such cases, it is important not to lose sight of the fundamental question: whether the work was actually performed and whether the unit owners who benefited from it can refuse to pay for it.

Karolina Laura Briliūtė, a senior attorney at the AVOCAD law firm, notes that in practice, debtors’ arguments often stray from the substance of the dispute itself. “In cases involving debts for repairs to common-use areas, we often see arguments that no competitive bidding process was organized, that procurement rules may have been violated, that there is insufficient data on the association’s or administrator’s payments to the contractor, or that payment documents have not been provided. Sometimes it is precisely these circumstances that form the basis for dismissing claims, even though they are not directly related to the main issue of the case—whether the work was performed and whether the owners are obligated to contribute to its financing,” says K. L. Briliūtė.

In the case at hand, the court of first instance had dismissed the claims, emphasizing, among other things, circumstances related to the procedures for organizing the work, the justification of the cost of the work, and payments to the contractor. However, the appellate court reached a different conclusion. The court noted that the evidence in the case suggests that the repair work was in fact performed and that the condition of the common-use facilities was improved. In the court’s view, a situation in which the direct beneficiaries of the work performed fail to pay for the work at all is inconsistent with the principles of justice, reasonableness, and good faith.

According to K. L. Briliūtė, it is precisely this point emphasized by the court that is particularly significant. “The court stated very clearly that one cannot ignore the fact that the work was performed and that all co-owners benefit from the results. If a common-use property has been repaired, procedural issues alone do not mean that the owners can be completely exempted from the obligation to cover their share of the costs,” the lawyer notes.

More importantly, the appellate court directly addressed the arguments that are raised particularly frequently in cases of this nature. The ruling states that the circumstances regarding compliance or non-compliance with procurement rules, as well as questions regarding the extent to which the homeowners’ association or the administrator has settled accounts with the selected contractor, are not of material significance in this case when determining the owners’ debt. In the court’s view, the case did not concern the issue of mutual settlements between the homeowners’ association or the administrator and the contractor, but rather whether the owners are obligated to pay for the repair work actually performed and to what extent these expenses are justified.

This position may be significant for many homeowners’ associations and property managers who face situations where some owners refuse to pay their share of repair costs, citing circumstances unrelated to the performance of the work itself. “It is important to understand that the maintenance and repair of common areas are the responsibility of all co-owners. Therefore, when evaluating such disputes, the focus should be on whether the work was necessary, whether it was actually performed, and whether the expenses are reasonable. Otherwise, a paradoxical situation arises in which common-use areas are repaired, all owners benefit from them, yet some of them refuse to contribute to covering the costs,” says K. L. Briliūtė.

The court also took into account the broader context of such disputes. The ruling emphasized that the opposite situation would negate the obligation of the owners of the premises themselves to maintain the common areas and would not ensure a final resolution of the dispute. In other words, the legal system cannot encourage a model in which co-owners benefit from the results of repairs but avoid covering their costs.

According to a senior attorney at AVOCAD, this ruling contributes to the development of a more consistent body of case law and may serve as an important guide in future cases. “The appellate court reiterated a fundamental rule: when evaluating such disputes, the most important thing is to determine whether repair work on common-use areas was actually performed and whether the co-owners benefited from it. It is precisely these circumstances that must be at the center of the dispute, rather than secondary issues that do not necessarily determine the existence of the obligation to pay itself,” summarizes K. L. Briliūtė. The ruling of the Vilnius Regional Court once again confirms that in cases initiated by homeowners’ associations and property managers regarding the recovery of repair costs, the most important factors remain the actual performance of the work, its results, and the co-owners’ obligation to contribute to the maintenance and upkeep of the common property.

Who is liable for the consequences when construction is carried out under a building permit that was officially issued but later deemed unlawful? Does the entire risk automatically fall on the builder, even if the builder acted in accordance with municipal decisions and documents issued by state authorities?

It is precisely these issues that the Supreme Court of Lithuania has addressed in detail in its most recent case law, as commented on by Viktorija Dubovskienė, an attorney with the law firm AVOCAD .

The court heard the case regarding the municipality’s decisions to lease a plot of state-owned land and issue a building permit for the construction of tennis courts and related infrastructure, even though the plot had been transferred to the municipality for a specific purpose—the construction of administrative and service facilities for the airfield.

The most significant part of this ruling is not the revocation of the permit itself, but—according to an AVOCAD attorney—the Lithuanian Supreme Court’s clarification regarding the allocation of costs for remedying the consequences of unlawful construction.

“The court emphasized that in cases where construction was carried out based on officially issued permits, liability cannot automatically be attributed solely to the builder. When determining who must cover the costs of demolishing the structures, restoring the site, or remedying other consequences, it is necessary to establish what role both public administration entities and the builder themselves played in the specific situation,” notes Viktorija Dubovskienė.

The ruling notes that the issuance of building permits falls specifically within the purview of public administration authorities, which are responsible for conducting preliminary construction oversight and ensuring that permits comply with the law.

The Supreme Court also relied on the case law of the European Court of Human Rights and emphasized that errors made by public authorities cannot be rectified by imposing a disproportionate burden on a private entity alone. “The court clearly stated that, before deciding on the removal of the consequences of the construction, it is necessary to identify the specific individuals or institutions whose actions led to the issuance of the unlawful permit and the illegality of the construction,” says the lawyer.

AVOCAD attorney Viktorija Dubovskienė notes that this practice could have a particularly significant impact on future disputes regarding illegal construction. “This case very clearly shows that courts will assess not only the formal existence of a permit, but also what actually created the situation that led to the consequences of the illegal construction. If a private entity acted in reliance on decisions by state institutions, the allocation of liability becomes much more complex,” she notes.

Until now, the prevailing view in practice has often been that the primary risk falls on the developer, but this ruling clearly reinforces the importance of the principle of proportionality. “In this case, the Supreme Court of Lithuania very clearly emphasizes that the role of public administration bodies cannot be ignored. If a municipality or other institution itself makes unlawful decisions, issues permits, and creates the conditions for a project to be implemented, the entire financial burden cannot be automatically shifted to the business alone,” says V. Dubovskienė.

The attorney also notes that this ruling could have a significant impact on the investment climate and business confidence in the state. “Businesses reasonably expect that permits issued by state institutions are lawful and enable them to carry out projects safely. Therefore, courts will increasingly assess not only the formal fact of a violation, but also the responsibility of the authorities and the investor’s own good faith,” she says.

This ruling by the Supreme Court of Lithuania establishes an important precedent regarding the proportionate allocation of liability in cases where construction is carried out on the basis of building permits that were later found to be unlawful, and clearly reiterates that the consequences of errors by state institutions cannot be automatically shifted to a single party—a private entity.

Does every deviation—even by a few centimeters—from the minimum distance specified in legislation automatically constitute illegal construction? In its latest ruling, the Supreme Court of Lithuania sent a clear message: not always.  Commenting on the latest case law, AVOCAD attorney Kamilė Šemeklytė notes that a mere formal non-compliance does not necessarily mean that the structure or utility networks will have to be removed. 

 

In this case, the court examined a dispute between the owners of neighboring plots regarding sewage networks installed too close to the plot boundary and a possible failure to maintain the required distance from a manhole. The plaintiff sought to have the defendants remove part of the sewage and water supply networks at their own expense, as, according to him, they had been installed less than 1 meter from the boundary of his plot, and the sewage networks—less than 10 meters from the manhole located on his plot. However, the courts at all levels dismissed the claim, and the Supreme Court of Lithuania upheld these decisions. 

 

The crux of this case is the court’s answer to the question of whether every instance of failure to comply with the minimum distance requirement must be formally regarded as automatically giving rise to an obligation to remedy the consequences of the construction. The Supreme Court of Lithuania clearly emphasized that the Civil Code cannot be applied mechanically. The court recalled previous case law, according to which very minor deviations from the distances established by law may be considered insignificant if they do not actually violate either public objectives or the rights of the owner of the neighboring plot. 

 

According to an AVOCAD attorney, this ruling is significant in that it demonstrates once again that disputes regarding construction and utility networks cannot be resolved solely on the basis of a ruler. “The Supreme Court clearly stated in this case that a mere formal discrepancy of a few centimeters does not automatically mean that the construction is unlawful. It is not only the deviation itself that is assessed, but also its significance—whether it actually infringes on a neighbor’s rights or undermines the objectives protected by law,” says K. Šemeklytė. 

 

What mattered was not the current data, but the data available at the time of completion of construction 

 

A key issue in the case was which distances should be taken into account—the current ones or those that existed at the time of completion of construction. 

The plaintiff relied on subsequent measurements, according to which the distance from the sewer lines to the boundary of his plot was even smaller in some places. However, the courts determined that, when deciding on the legality of the construction, the most important factor is the situation at the time of completion of the construction. And at that time, the distances measured were 1.04 m, 0.98 m, and 0.92 m. 

This meant that the deviations from the required 1-meter distance were only 2 and 8 centimeters. The Supreme Court of Lithuania acknowledged that such deviations are insignificant and do not in themselves constitute grounds for declaring the construction unlawful. “In practice, this is very important. The court emphasized that one cannot automatically rely on measurements taken several years later and conclude from them that the construction was unlawful from the very beginning. The actual situation at the time when the structure or networks were installed and construction was completed must be assessed,” the lawyer emphasizes. 

 

The court did not limit itself to formal logic, but considered the actual impact 

 

It is also important to note that the courts considered not only the specific measurements but also the broader context: the networks were installed in an area where other utilities were already present, and the plaintiff failed to propose any realistic alternatives for relocating such a network without infringing on the interests of others. This demonstrates a consistent approach by the courts—even when a certain deviation formally exists, the court still assesses proportionality, the actual consequences, and whether the most stringent measure is indeed justified. According to Kamilė Šemeklytė, this ruling sends an important message to both owners of neighboring plots and builders: it is not enough for the court to simply show that a figure does not meet the standard. “It is necessary to justify why the violation is significant, what actual consequences it causes, and why the removal of the construction’s effects is a proportionate measure,” she states.  

Another part of the case concerned the plaintiff’s claim that the sewer lines had been installed too close to a manhole located on his property. However, the courts found that there was insufficient evidence in the case to prove that this manhole actually existed at the time the disputed sewer lines were being designed and installed. 

The plaintiff argued that this was obvious, but the Supreme Court of Lithuania emphasized a fundamental principle of civil procedure: each party must prove the facts on which it bases its claims. If a claim is based on the fact that a certain object already existed during the period relevant to the dispute, it is precisely that fact that must be proven. 

 

The court also rejected the argument that a so-called surprise decision had been rendered in this part of the case. The Supreme Court explained that the existence of the shaft well had been one of the key facts of the case from the very beginning, and therefore the plaintiff should have understood that it was necessary to substantiate this claim with evidence. 

“This is a very clear reminder that in civil cases, a logical narrative or a belief in one’s own righteousness is not enough. If a claim is based on a specific factual circumstance—for example, that the well was already there before the pipes were installed—that circumstance must be proven. In other words, the procedural obligation to prove a fact does not disappear even when a party believes the fact is self-evident,” notes the AVOCAD attorney. 

 

This ruling by the Supreme Court of Lithuania is relevant to anyone dealing with property boundaries, the installation of utilities, renovations, or disputes regarding the legality of construction. On the one hand, it confirms that the courts uphold property rights and the distances established by law. On the other hand, this protection is not strictly formal—very minor deviations that do not cause actual harm may be considered insignificant.  The success of a dispute depends not only on whether a formal non-compliance can be demonstrated, but also on whether the party can precisely substantiate when the violation occurred, its extent, which rights it actually infringes, and what legal consequences should apply.  “From a practical standpoint, this is a very useful case. It demonstrates that in disputes over minimum distances, it is not only the text of the regulation that matters, but also the evidence, the timing, and the assessment of proportionality. This means that, whether planning construction or preparing for a dispute, it is essential to very carefully assess the factual circumstances and the evidence,” summarizes K. Šemeklytė.