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 on the basis of 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 solely on a private entity. “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 points out 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.