The construction of buildings represents a key segment of the construction industry, encompassing all stages from planning and designing, obtaining necessary documentation (location information, zoning conditions, construction permits), construction, to the completion of the structure, obtaining the usage permit, and technical acceptance, bringing the building into operation. This process requires detailed alignment with regulations, standards, and norms to ensure that the buildings are safe, functional, constructed according to professional rules, and in line with market needs. Investing in building structures today is considered one of the most profitable branches of the economy, both globally and nationally. The development of urban areas, infrastructure modernization, and population growth contribute to the constant demand for new residential, commercial, and industrial buildings. However, the construction process is not only a technical challenge but also a legal one, as a number of legal and administrative procedures must be strictly followed.
Regulation and Legal Framework in the Construction Industry
The legal framework governing the construction of buildings in the Republic of Serbia involves the application of a large number of regulations, which is why hiring a lawyer specializing in this field is essential for the legality and safety of construction.
Documentation
Performing construction work without first obtaining a construction permit is a criminal offense. For this reason, it is necessary to gather all the necessary documentation before starting the construction to ensure that the investor obtains the construction permit and starts building the desired structure according to the law.
The documentation the investor obtains before starting construction, as well as the documentation gathered during construction, is numerous. In general, it includes the following:
- Project and technical documentation
- Location information (issued by the municipality responsible for the area where the land is located)
- Approvals and consents (consent from co-owners, neighbors, heritage protection agencies, environmental protection agencies, etc.)
- Construction approval decision (construction permit)
- Usage permit decision (usage permit), and others.
Gathering all the required documentation to start building can be an extremely challenging and time-consuming process, which is why many investors hire a construction lawyer. For this reason, it is recommended that investors, in addition to experts in the construction field (architects, structural engineers, civil engineers, etc.), also hire a lawyer to complete all the necessary documentation for the commencement of construction. Once the construction permit is obtained, the investor can either independently or through a contractor proceed with the work aimed at constructing the building. Since the process of obtaining permits is strictly regulated, consulting with a lawyer can significantly speed up the procedure and reduce the risk of legal obstacles.
Construction Contract
The construction contract is one of the most important legal agreements an investor enters into when building a structure. The drafting of this contract requires exceptional attention, as it forms the foundation for all future rights and obligations between the investor and the contractor.
The construction contract is regulated by the provisions of the Law on Obligations. In addition to the provisions of the Law on Obligations, the Construction Specific Terms, which govern the relationship between the client and the contractor in construction work, may also apply. The Specific Terms for Construction are applied if the contracting parties have agreed to their implementation.
The construction contract is a contract under which the contractor undertakes to construct a building according to a specified project within a stipulated time frame on a specified plot of land, or to perform other construction work on such land or an existing structure, and the client undertakes to pay a specified price for the work.
The subject of this contract is the “structure,” which includes buildings, dams, bridges, tunnels, water supply systems, sewers, roads, railways, wells, and other construction works requiring large and complex operations.
The contractor is obliged to allow the client continuous supervision over the work and control of the quantity and quality of materials used. For any deviation from the construction project or agreed work, the contractor must obtain written consent from the client. The contractor cannot request an increase in the agreed price for work performed without such consent.
To avoid legal uncertainties, it is recommended that investors hire a lawyer specialized in this area, who will ensure that all contractual relations are in line with applicable laws and regulations.
Contract Between Subcontractors
In practice, it is common for a contractor to conclude agreements with other subcontractors, which regulate the rights and obligations between the contractor and the subcontractor. In such situations, the subcontractor is not in a contractual relationship with the client and is responsible for the quality of their work only to the contractor. On the other hand, the contractor is responsible to the client for both the work they performed personally and for the work carried out by subcontractors, unless otherwise specified in the construction contract concluded between the client and the subcontractor.
Form of the Construction Contract
The Law on Obligations explicitly stipulates that a construction contract must be concluded in writing. However, this does not mean that the contract must be notarized. For the contract to be valid, it is sufficient for it to be in written form.
Construction Contract with “Turnkey” Provision
If the construction contract includes a “turnkey” provision or a similar provision, the contractor independently undertakes to complete all the necessary work for the construction and use of a particular, complete structure. In this case, the agreed price includes the cost of any unforeseen work and work excesses, excluding the impact of work deficiencies on the agreed price. If more than one contractor participates in the “turnkey” contract, their liability to the client is joint.
Liability for Defects
The rights of the client towards the contractor due to construction defects also extend to all subsequent owners of the building or part of it, but with the condition that the new owners do not have a new deadline for notification and lawsuit, rather, the deadline of the previous owner is applied to them. To ensure legal protection in case of hidden defects, it is recommended to cooperate with a lawyer who can assist in asserting the client’s rights.
The contractor is responsible for defects in the construction of the building that affect its solidity, if such defects are discovered within ten years from the handover and acceptance of the work. The contractor is also responsible for defects in the land on which the building is constructed, which are discovered within ten years from the handover and acceptance of the work, unless a specialized organization has provided a professional opinion that the land is suitable for construction and no circumstances arose during the construction that would undermine the validity of the expert opinion.
The client or another subsequent owner is obliged to inform the contractor and the designer of any defects within six months from when the defect was discovered, otherwise they lose the right to rely on the defect. The client’s or another subsequent owner’s right to claim against the contractor or designer due to their responsibility for defects expires one year from the day the client or subsequent owner notified the contractor or designer about the defect.
The contractor is not relieved of responsibility if the damage occurred due to following the client’s instructions in performing certain work. However, if the contractor warned the client of the potential danger of damage before performing the work as requested, the contractor’s liability is reduced and, depending on the circumstances of the case, may be excluded.
When both the contractor and the designer are responsible for the damage, their responsibility is determined according to the degree of fault. The designer, who created the building design and was entrusted with overseeing the execution of the planned work, is also responsible for defects in the executed work caused by the contractor’s fault if they could have noticed them through normal and reasonable supervision of the work. However, the designer has the right to seek appropriate compensation from the
contractor. The contractor who has compensated the damage caused by defects in the executed work has the right to seek compensation from the designer to the extent that the defects in the work stem from defects in the design.
Urgent Unforeseen Works
The contractor may carry out unforeseen work without prior consent from the client if, due to the urgency of the work, they were unable to obtain the client’s consent. If unforeseen and urgent work arises, engaging a lawyer is crucial in resolving the legal and financial implications of such situations.
Unforeseen work refers to tasks that were necessary to ensure the stability of the building or to prevent damage, caused by unexpected difficult soil conditions, unexpected water occurrence, or other extraordinary and unforeseen events. The contractor is obliged to immediately notify the client about these occurrences and the measures taken. The contractor is entitled to a fair compensation for unforeseen work that had to be carried out. The client may terminate the contract if, due to these works, the agreed price needs to be significantly increased, and must notify the contractor immediately.
In the event of contract termination, the client is required to pay the contractor the corresponding part of the price for the work already performed, as well as fair compensation for necessary costs incurred.
Price of Work
The price of the work can be determined per unit of the agreed works (unit price) or as a total amount for the entire building (total agreed price). If the contract does not specify otherwise regarding price adjustments, the contractor, who has fulfilled their obligation within the specified deadline, may request an increase in the price of work if, between the conclusion of the contract and its fulfillment, the prices of elements on which the work price is based have increased to such an extent that the price should be raised by more than two percent. If the contractor is responsible for a delay and has not completed the work within the contractually agreed period, they may request an increase in the price if, between the conclusion of the contract and the day when the work was supposed to be completed, the prices of elements on which the price of work was based have increased, such that the new price based on the new element prices exceeds five percent.
In case these conditions are met, the contractor can only request the difference in the price that exceeds two or five percent. The contractor cannot rely on an increase in the price of the elements on which the work price was based if the price increase occurred after their delay.
If it was agreed that the work price would not change in case of an increase in the prices of the elements on which it is based, the contractor can, despite such a provision in the contract, request a change in the work price if the prices of the elements have increased to such an extent that the price of the work should be higher by more than ten percent. In this case, the contractor can only request the difference in the price exceeding ten percent unless the price increase occurred after their delay.
Certainly, if a situation arises that would lead to a significant price increase, the client may terminate the contract. In the case of contract termination, the client is obliged to pay the contractor the appropriate part of the agreed price for the work performed up to that point, as well as fair compensation for necessary costs incurred. In cases where the price of the work changes, a lawyer can assist in negotiations and protecting the investor’s interests in accordance with the contractual provisions.
If, between the conclusion of the contract and the fulfillment of the contractor’s obligations, the prices of elements on which the work price is based decreased by more than two percent, and the work was completed on time, the client has the right to request a corresponding reduction in the agreed price above that percentage. If the contract stipulates that the price of work is fixed, and the work is completed on time, the client has the right to reduce the agreed price if the prices of elements on which the price was based have decreased by so much that the price would be lower by more than ten percent, and the reduction is for the difference in price above ten percent. In the case of the contractor’s delay, the client has the right to a proportionate reduction in the price of the work for every decrease in the price of the elements on which the work price was based.
Legal Assistance in Building Construction
Investing in the construction of buildings in the Republic of Serbia is an extremely complex business endeavor that can bring substantial profits but also carries numerous challenges. Regardless of the size of the project, the legal aspects of construction are intricate and often become an obstacle if not properly addressed. Therefore, engaging a lawyer specialized in this field is a key step toward security and success for every investor.
The procedure for obtaining all the necessary documentation to start building a property is complex, which is why a lawyer for construction permits is essential in managing the entire legal process. An experienced lawyer ensures that all legal aspects of the project comply with the legislation, minimizing the risks of irregularities, penalties, or work stoppages. With proper legal advice, the investor can preemptively address many potential legal disputes with contractors, suppliers, or even local authorities. The lawyer will ensure that all contracts and agreements are in the investor’s best interest and are properly drafted to avoid misunderstandings or future problems.
Legal assistance allows for quicker and more efficient project realization. Through legal support in obtaining the necessary permits, ensuring compliance with laws, and negotiating with third parties, the investor can focus their energy on the project’s execution while the lawyer handles all the legal procedures.
Radoičić & Partners Law Office has been involved in numerous projects related to the execution of complex construction works and the construction of various types of buildings since its establishment. We are pleased to note that we have represented numerous investors and contractors, providing expert legal assistance in all phases of construction.
Legal Services We Provide
Radoičić & Partners provides complete legal services related to the construction of buildings, from land acquisition to the registration of the newly constructed property in the land registry, and our construction lawyer offers support in every segment of this process.
The main services we provide are:
- Full legal service for purchasing land on which construction works will be carried out, up to the registration of the property
- We file requests for land use changes and other requests to the relevant authorities related to construction
- We obtain complete documentation (approvals, consents) necessary for the final approval for construction (building permit)
- We prepare and draft construction contracts
- We participate in negotiations with contractors, material suppliers, transporters, and other partners involved in the investor’s business endeavor
- We draft contracts for the sale of goods (construction materials) that the investor will conclude with suppliers
- We draft loan agreements for construction machinery (if the investor is renting machinery for work on the building)
- We represent clients in disputes (disagreements with contractors, suppliers, or administrative authorities)
- We provide tax consulting services
- We draft purchase contracts for apartments between the investor and the buyers