Construction Law in Cyprus: Contracts, Permits and Disputes

Developers, contractors, subcontractors and consultants

Building contracts, permits and project set-up for developers, contractors, subcontractors and consultants.
Disputes over defects, delay, variations and unpaid certificates.
Most files start the same way: the building is not what the contract described, or it is not finished on time.

We advise developers, main contractors, subcontractors and consultants on building contracts, permits and project set-up, and act in construction disputes over defects, delay, variations and unpaid certificates, including for clients based outside Cyprus.

Most of what reaches us starts the same way: the building is not what the contract described, or it is not finished when the contract said it would be.

Building contracts and sub-contracts: scope and specifications, programme, payment tied to progress, retention, termination and dispute resolution
Guarantees, bonds, financing and insurance, and the parties each one actually protects
Permits, planning and environmental legislation, which is where a project is usually delayed before anyone has argued about workmanship
Procurement and tender processes, and property development agreements
Defects: what was contractually promised, what was delivered, and the remedies in between
Delay and extension of time, liquidated damages, and claims for loss and expense
Variations, unpaid certificates, and claims against professional consultants
Renewable energy projects at the contract level: land and lease arrangements, installation and connection agreements, and power purchase agreements

Most construction disputes are decided by a document signed before the first block was laid: a vague scope, an open-ended programme, payment terms disconnected from progress, and no meaningful remedy for delay or defects. If you are about to sign a building contract, the time to send it to us is then, not after the defect appears.

Where a dispute has already arisen, the claims a Cyprus project produces and how each one is approached are set out on our page on construction disputes in Cyprus.

What to send us in a first enquiry

The contract and specification, the approved plans and permits, and a short chronology of what happened and when. Photographs and any expert report you already have. That is usually enough for a first view.

Time limits

Which limit applies depends on how the claim is put. A claim on the building contract, including delivery of a defective property, runs for six years under section 7(1) of the Limitation of Actions Law 66(I)/2012. A claim in negligence against an architect, an engineer or a contractor runs for three years under section 6(2). Time runs from the defective work or from delivery, not from the day the defect appears, unless it was deliberately concealed. In practice the evidence binds first: these claims are won on expert evidence that gets harder to gather the longer a building has been lived in.

Set out in our own guides, Building Defects in Cyprus and Delay Claims in Cyprus Construction Contracts.

If the matter is a purchase, a title or a lease rather than a build, it is covered under Property.

Before you sign

The clauses that decide the next two years

A building contract is read carefully twice: once by us before it is signed, and once by everyone when something has gone wrong. The first reading is far cheaper.

Scope and specification

The scope is the yardstick against which everything later is measured, and a scope that exists only as a bill of quantities or a paragraph of description is not a yardstick at all. It should be defined by drawings and a specification that are identified by number and revision and attached to the contract, so that there is no argument about which version was current. Where materials or finishes are named, the contract should say what happens if they cannot be obtained, because the substitution nobody planned for is one of the most common sources of a defects claim.

Programme and completion

A completion date that can be moved by anything either party says is not a date. The contract should fix a date, set out the specific grounds on which it can be extended, require notice within a stated period for any claim to extend it, and say what happens if that notice is not given. Sectional completion, where parts of the works are to be handed over separately, needs its own dates and its own consequences rather than being left to be inferred from the whole.

Payment, certification and retention

Payment should follow progress, and progress should be measurable by something other than the contractor's own opinion of it. The contract should say who certifies, on what basis, within what period, and what a party may do if a certificate is not issued or is not paid. Retention should state the percentage, the events that release each part of it, and a long stop by which the balance is released, because retention that has no release date is retention that is still outstanding a decade later. Advance payments, if any, should be secured.

Variations

Every project changes. What the contract has to do is make the change traceable: who may instruct a variation, in what form, how it is valued, and what happens when work is done without an instruction. Contracts that require written instructions and are then administered verbally produce the worst of both worlds, since the paperwork defeats the contractor and the informality defeats the employer. If the parties intend to work by email, the contract should say that email is enough.

Quality, defects and handover

The contract should define what completion means, what has to be delivered at handover, and what the parties do about items outstanding on the day. The defects liability period, its length, what triggers it and what obligations it imposes on the contractor to return and put things right, belongs here rather than in the correspondence. So does the question of who holds which guarantees and warranties on materials and installed plant, and how they are transferred to the party that will actually need them.

Security, insurance and the parties behind the parties

A performance bond, a parent company guarantee or a personal guarantee changes what the contract is worth if the counterparty fails, and the question of who is standing behind a newly incorporated contractor is worth asking before signature rather than after. The contract should identify what insurance each party carries, for what amount, for how long, and who is named on it. Where consultants are engaged separately, their appointments should be read against the building contract rather than in isolation, since a gap between the two is where responsibility disappears.

Termination and dispute resolution

The termination clause is the one nobody expects to use and the one that determines what happens when the project fails. It should set out the grounds, the notice required, the opportunity to remedy, and the consequences for the site, the materials, the plant and the valuation of work already done. The dispute resolution clause should be a decision rather than a default: arbitration or court, where, and whether any step has to be taken first. Both clauses are worth ten minutes at signature and are worth a great deal more than that later.

During the project

What to do while it is being built

The party that kept records is the party that wins. This is true on both sides and it costs almost nothing.

Give the notices the contract requires, when it requires them, even when the relationship is good. Notices are not aggression, they are the mechanism the parties agreed on, and a claim that was contractually sound is regularly lost because the notice that preserved it was never sent. A party that gives notices consistently from the beginning is also not signalling anything unusual when it gives one that matters.

Confirm verbal instructions in writing the same day, in a single sentence, whoever gave them. Keep the site diary, the labour and plant returns, the delivery notes and the minutes of site meetings, and keep them somewhere other than one person's laptop. Photograph the works as they proceed, particularly anything that is about to be covered up, and keep the photographs with their dates intact. Make and answer complaints in writing: an objection recorded at the time is worth more than the same objection recalled two years later, and an answer given at the time is worth just as much to the party that gave it.

Deal with payment applications and certificates on time and in the form the contract requires, and state the reason for any deduction when the deduction is made rather than when it is challenged. Where the works are being varied heavily, keep the variation account as a running document rather than reconstructing it at the end, because a final account assembled from memory takes months and settles for less.

If something has already gone wrong, the claims a Cyprus project produces and how each is approached are set out under construction disputes. The practice as a whole, including project set-up, procurement and the parties we act for, is under construction lawyers in Cyprus.

How a matter runs

From first contact to implementation

Every matter is different, but the route is broadly the same. Knowing it in advance makes the cost and the timetable easier to judge.

First contact and conflict check

Land Registry search, review of the contract, plans, permits and correspondence

Engagement and fee agreement before any work begins

Assessment of the position, including title, permits and any limitation period running

Negotiation with the seller, developer or contractor, or proceedings where that is the right route

Documentation: contract, deposit at the Land Registry, settlement or pleadings

Implementation and monitoring of the agreed terms

Frequently asked questions about construction law in Cyprus

How long do I have to bring a claim about a building defect?

It depends on how the claim is put. On the building contract, six years, under section 7(1) of the Limitation of Actions Law 66(I)/2012. In negligence against the architect, the engineer or the contractor, three years, under section 6(2). Time runs from the defective work or from delivery, not from the day the defect appeared, unless it was deliberately concealed. The evidence usually binds before the period does: a defect claim needs expert evidence on what went wrong and when, and that gets harder to gather the longer the building has been lived in. Document the defect, establish the dates, then take advice.

Can you review a building contract before I sign it?

Yes, and it is the cheapest useful thing we do. We look at whether the scope is actually defined by drawings and specifications, whether the programme has an end date that means something, whether payment follows progress, and whether there is a real remedy for delay and for defects. Most construction disputes are decided by a document signed before the first block was laid.

The contractor has stopped work and is asking for more money. What are my options?

Start with the contract rather than with the conversation. Whether the contractor is entitled to more depends on what has been instructed, what has been certified and what the payment provisions say, and whether it is entitled to stop depends on separate provisions again. Paying to restart work without recording what the payment is for, and without dealing with the underlying entitlement, tends to buy a few weeks and weaken your position. Send us the contract, the payment applications and the certificates, and the answer is usually clear quickly.

Do I need a written contract at all for a small build?

The smaller the project, the more likely it is that there is nothing in writing and the more painful the argument becomes, because there is no yardstick for what was promised. A short written agreement that identifies the drawings and specification, fixes a price and a completion date, ties payment to progress and says what happens about defects will cost a fraction of one week of a dispute. It does not have to be long to be useful.

We are partway through and the relationship is deteriorating. Is it too early to take advice?

It is the best moment. While the works continue, the records that decide the case are still being created and the notices the contract requires can still be given in time. Advice at that stage is usually about administering the contract properly for the remainder of the project, which is both cheaper than litigation and frequently the thing that prevents it.

Who is responsible if the design is wrong rather than the workmanship?

That depends on who was engaged to do what, and it is answered from the appointments rather than from the site. Design responsibility may sit with a consultant engaged directly by the employer, or with the contractor where the contract places design on it, and a single physical defect can involve both in a proportion that has to be established. This is why the consultant appointments and the building contract are read together rather than separately.

The building is finished but items are outstanding. Should I pay the final account?

Not without recording the position. Payment against an unqualified final account can be treated as acceptance, so if there are outstanding items, defects or a retention still to be released, that should be documented at the time and the payment made on stated terms. This is a short piece of drafting and it preserves everything that would otherwise be argued about later.

Who leads this work

Andreas Kleanthous

Partner

Litigation, personal injury and insurance claims, debt recovery, administrative law, real estate, wills and probate.

Klitos Platis

Partner

Litigation, corporate and commercial matters, property and construction, including pleadings, interim applications and trial preparation.

Written on this subject

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