LITHUANIA Law and Practice Contributed by: Evaldas Klimas and Mantas Lideika, WALLESS
• Results – this typically includes the prepara - tion and presentation of the due diligence report, which details the main risks involved and makes suggestions for transaction docu - mentation. Usually, red-flag due diligence is performed, out - lining only the major issues pertaining to the real estate under the agreed materiality threshold. 2.5 Typical Representations and Warranties The seller has a statutory obligation to disclose to the buyer all third parties’ rights, mortgages, seizures, ongoing litigation and other encum - brances with respect to the real estate. In the case of a breach by the seller or if the seller is not able to prove that the buyer was aware of the respective encumbrances, the buyer is enti - tled to claim a reduction of the purchase price or termination of the sale and purchase agreement. Fines are the most common security for the enforcement of those remedies; representation and warranty insurance is not used in Lithuania. No specific new representations and warranties were brought about by the COVID-19 pandemic. Risks related to the pandemic were usually man - aged through the structuring of the transaction. There is no typical cap on the seller’s liability for a breach of its representations and warranties. In some cases, such cap is agreed but it depends on the specifics of the transaction and/or the real estate. Usually, only the representations and warranties related to the suitability of construction works expire after the end of the warranty terms stipu - lated in the legal acts – five, ten or 20 years. Other representations and warranties are subject
to a general limitation period for filing a claim with the court (ten years, in most cases). The buyer cannot rely on the encumbrances over real estate and invoke remedy measures against the seller if the seller has notified the buyer of those encumbrances or if the buyer could have learned of them from the public registers. 2.6 Important Areas of Law for Investors Depending on the type of investment, it is important for an investor to consider planning and zoning, environmental law, competition law, etc. Merger clearance (required by the Law on Competition) is necessary when: • the total gross income of the companies participating in the merger (concentration) in Lithuania during the last financial year before the merger is more than EUR20 million; and • the total gross income of each of at least two companies participating in the merger dur - ing the last financial year before the merger is more than EUR2 million. 2.7 Soil Pollution or Environmental Contamination In the case of pollution or contamination, Lithu - ania implements the “polluter pays” rule, under which the buyer of a real estate asset will be held responsible for soil pollution or environmental contamination if they cannot identify the person responsible for such damage. 2.8 Permitted Uses of Real Estate Under Zoning or Planning Law Permitted uses of a parcel of real estate are asserted according to a master plan, or the detailed plan if one has been prepared. However, for certain developments, construction opportu - nities may be assured only after the construction permit is issued. Until the issue of such permits,
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