REALWorld Law

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

In Denmark, the use of standard form building contracts goes back more than 100 years.

There are four standard form building contracts that are used in Denmark:

• AB 18 – General conditions for the provision of works and supplies within building and engineering.
• ABT 18 – General conditions for turnkey contracts.
• ABR 18 – General conditions for consulting services.
• Note: AB Consumer – 'General conditions for the provisions of works within building to consumers. (A standard form contract that takes into consideration that the employer is a non-professional party.)

These standard form building contracts are updated versions of the formerly used AB 92, ABT 93 and ABR 89 documents, which were drafted in accordance with the recommendations made by a Committee set up by the Danish Ministry of Housing with a cross section of representatives from the construction industry. The standard terms and conditions - commonly referred to as 'agreed documents' - have been developed through collaboration among representatives of the key stakeholders involved in the construction industry. The standard form contract terms apply solely by virtue of the parties' agreement.

The standard form contracts, particularly AB 18 and ABT 18, are widely used in both public and private construction projects. AB 18 is typically used where the client provides the design, whereas ABT 18 is used for design-build projects where the contractor also performs the design. Both forms allocate risks and responsibilities in a similar way, with only minor differences in numbering and the design obligations.

Once adopted, they form the contractual basis unless expressly derogated from. In Danish construction practice, the standard form contracts AB 18 or ABT 18 are almost invariably adopted as the contractual basis when agreements are entered into between professional parties.

International contract forms (such as FIDIC) are used in Denmark, however, primarily within the off-shore/energy sector and/or large-scale infrastructure projects.

Last modified 17 Feb 2026

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

The main parties involved in a construction project are:

Client

The party procuring the work – for example, at developer or property owner. In building contracts this party is referred to as the 'Client'. The client is responsible for providing the project requirements, payment, and overall project coordination.

Contractor

Typically a main building contractor is employed to carry out and complete the work for the employer/client. Contractors may also take responsibility for the design of all parts of the works and often engage sub-contractors to carry out and complete separate parts of the work.

Where there are faults or defects in the construction the contractor can incur liability to remedy the defects after delivery. This follows from the AB 92 and from the basic principles of contract law to the effect that the employer has a right to have the contract performed.

Designers

This normally comprises the architect, civil and structural engineer, mechanical and electrical engineer.

Where there are defects in the construction that are due to the negligence of the designer, the designer can be held liable to the client solely or jointly with the contractor.

Non-designers

Contract administrator, project manager, etc.

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What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

The main building contractor is responsible for the construction. This means the contractor assumes responsibility for the means and methods of construction, ordinary risks such as normal weather delays, minor unforeseen difficulties, and any mistakes or negligence in carrying out the work. The contractor also generally carries the risk of damage or loss of work and materials until completion. AB 18 provides that the contractor bears the risk of accidental damage to the work up to handover. Practically, this is mitigated by the requirement that the client’s insurance covers fire and storm damage. On the other hand, the contractor does not bear the risk of damage or loss resulting from circumstances attributable to the client; and under AB 18 the employer must compensate the contractor for delays or extra costs caused by the client.

Where a turnkey contractor is used that contractor is additionally responsible for the design of the works (all design services). The design consultant in this instance is appointed by the turnkey contractor.

Force majeure is recognized in Danish construction contracts as a basis for relief from delay penalties and obligations. The contractor does not bear the risk of damage or loss resulting from external extraordinary events over which the contractor has no influence, including war, insurrection, acts of terrorism, and unusual natural events.

 

Last modified 17 Feb 2026

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

Public-private partnerships (PPPs) have been used in Denmark but are not very common  The Danish government has encouraged the consideration of PPP models . This has led to some increase in PPP projects in recent years. However, traditional procurement methods still dominate the market.

PPPs in Denmark have primarily been implemented in sectors such as public buildings, healthcare facilities, defence infrastructure, education and transportation projects and utilities.

Last modified 17 Feb 2026

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

It is theoretically possible for the parties to enter a construction contract where the price is fixed, but the reality is that both the employer and the contractor want some flexibility in the contract.

The client normally wants to have the right to instruct a contractor to carry out variations/alterations and the contractor normally wants to have the right to undertake variations/alterations that are requested for an additional payment.

Thus, it is very uncommon for the involved parties to enter a 'fixed price contract'.

Apart from this, it is standard that the contract price is stated as fixed in contrast to payment on a cost-reimbursement basis.

Last modified 17 Feb 2026

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

Under the general conditions in the standard form construction contracts, AB 18 and ABT 18, the employer shall take out and pay for the usual fire and storm and tempest insurance from the commencement of the work until any defects identified at handing-over of the construction have been rectified. All contractors and sub-contractors are to be co-insured on this policy, and the client  bears any deductible (excess) so that the contractors are effectively protected. It is often agreed that such insurance is taken out as an all-risk construction insurance.

Public authorities as clients  can opt to self-insure instead of taking out a policy. 

The contractor and any subcontractors are required to take out usual professional and product liability insurance.In case of new building or material rebuilding of a residential property, the client is obligated by law to take out and pay for the building construction insurance (Byggeskadeforsikring) that follows the building after completion.

Last modified 17 Feb 2026

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

It is customary in Denmark for parties to provide security for their contractual obligations in major construction contracts. Under the general conditions in the standard form construction contracts, AB 18 and ABT 18, the contractor must provide a performance bond as security for the performance of the contractor’s obligations to the client. The performance bond must be provided within a period of eight working days of the contract signing. This security may be in the form of an adequate guarantee from a bank or a savings bank, a surety bond, an insurance guarantee or other adequate types of security.

The security will normally be reduced in stages and ceases five years after handing over the construction works to the employer. Usually, the security offered by the contractor shall correspond to 15% of the contract sum exclusive of VAT until handover of the works, which is reduced to 10% from handover to the first-year inspection of the property from which point the security is reduced to 2% until the final release five years after handover.

If the client discovers defects in the construction before the first-year inspection of the property, the reduction in the contractor's security may be postponed until the defects has been relieved by the contractor.

At the five-year inspection, the bond is released if no unresolved claims are outstanding.

The client likewise is required to provide a performance bond as security for the performance of the client’s obligations to the contractor. The performance bond must be provided within a period of eight working days of the contract signing unless the client is a public sector client or a social housing organisation. This security may be in the form of a guarantee from a bank corresponding to three months’ average payments – but not less than 10 % – of the contract sum exclusive of VAT. This protects the contractor against non-payment.

Last modified 17 Feb 2026

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

According to the general conditions in the standard form construction contracts, AB 18 and ABT 18, the total contract sum can be paid under two different systems:

1. Upon written request to the client, the contractor is entitled to receive payment twice a month for any works performed and for materials executed or delivered to the construction site in conformity with the contract.
2. The parties can agree that payment shall be made in accordance with a payment schedule. The payment schedule must follow the agreed master programme and stipulate the dates or milestones at which the contract sum falls due for payment in full or in part. On submission of payment request, the contractor is entitled to receive payment at the agreed dates, provided that the work to which the payment is related has been performed.

The contractor can claim interest on late payments under the Danish Interest Act (Renteloven).

Last modified 17 Feb 2026

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

It is normal practice that construction contracts require works to be completed by a specified date. In the event of a delay the contractor is entitled to extension of time if the execution of the works is delayed as a result of:

• Variations to the works ordered by the client (extra work);
• The circumstances attributable to the client or delay on the part of another contractor;
• Force majeure events;
• Precipitation, low temperatures, strong winds or other extremes of weather if such extremes occur to a significantly greater extent than could have been foreseen taking the season and region into account; or
• Public enforcement notices or prohibitions which are not due to circumstances of the contractor.

If one of these events occurs and causes delay, the contractor must promptly notify the client  and is then granted a time extension equal to the delay caused. During an excusable delay, the contractor is not liable for being late.

It is standard practice for construction contracts to contain provisions which require the contractor to pay liquidated damages (dagbod) in the event of delays for which the contractor is responsible.

Last modified 17 Feb 2026

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

Under the general conditions in the standard construction contracts, AB 18 and ABT 18, the client has the right to request variations to the works – meaning additions, omissions, or changes to the work – within the overall nature of the project. The building contractor is entitled to undertake such alterations, unless the client included special conditions, which justify that the performance of the work be undertaken by others. If the contractor is entitled to undertake alterations the contractor will also be entitled to additional payments and time.

If variations are made because of the contractor's error, delay or default, the contractor will not be entitled to additional time or payment.

In practice, even when AB 18 and ABT 18 are not agreed between the parties, most contracts permit variations and entitle the contractor to corresponding adjustments. This flexibility is essential as the client retains the ability to refine the project during construction, and the contractor is protected from having to do extra work for free or under impossible deadlines.

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What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

Danish construction law and standard contracts define completion of the works as the stage at which the building or works have been finished in accordance with the contract and are ready for their intended use.

Where the works do not comply with the contract, a distinction between significant and insignificant faults and defects must be made. In the case of insignificant faults and defects the works may be considered to be 'completed', despite the non-compliance with the contract. In the case of significant faults and defects, the building works cannot be considered completed and therefore cannot be certified. Under AB 18, a handover inspection (afleveringsforretning) is conducted jointly by the parties at completion. During this handover meeting, the parties inspect the works and any defects are recorded. If only insignificant defects are found, the project is accepted as complete on that date. The outcome is documented in a handover protocol signed by both parties, which effectively certifies completion. Thus, it is the parties who certify that completion has occurred.

Under Danish contract law freedom of contract makes it possible toagree on specific criterias that must be met before the works are deemed complete.

Before moving into the building, it is necessary to obtain an occupancy permit (ibrugtagningstilladelse) from the municipality, which is not granted until the building works are practically completed and compliant with building regulations.

Last modified 17 Feb 2026

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

Under a construction contract, the time period during which a party may bring a claim for breach is governed either by the contract or by the Limitation Act (Forældelsesloven),

According to the general conditions in the standard form construction contracts, AB 18 and ABT 18, the client’s claim against the contractor for defects shall be made within five years of handing-over (completion) of the work. After this period the client is not entitled to make a claim against the contractor.

The Limitation Act provides for different limitation periods for various types of actions but does not apply where AB 18 and ABT 18 are agreed upon.

Under the Limitation Act the limitation periods in AB 18 and ABT 18 are not applicable between a commercial contractor and a non-commercial client. The Limitation Act provides for three different limitation periods: A three-year limitation period (called the "relative" deadline for complaints) and a 10-year or 30-year limitation period (called the "absolute" or "ultimate" deadline for complaints) depending on the type of the claim – respectively property damage, personal injury or environmental damage. Further a 5 year limitation period (special claims).

Last modified 17 Feb 2026

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

A second buyer of the property, meaning someone who bought the property from a buyer who bought it from the developer, can raise a claim against the developer in some circumstances and depending on the character of the claim. Recourse to a prior party or making a direct claim against an original developer is generally quite a complex matter. However, it has been known in relation to real estate.

If the developer constructs a building with the intention of selling it, the limitation periods in the Limitation Act apply between the end user/buyer and the developer/seller.

Last modified 17 Feb 2026

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

Under Danish law, pure economic loss is not recoverable where there is no contract between the parties, which is the case here. There is no contractual relationship between these parties and the end user of a completed development. The normal practice is to go for  the contracting party. A claim for defects can then trigger a chain reaction, where the buyer first makes a claim against the seller/client, the client then make a claim against the main contractor, the main contractor against the subcontractor, the subcontractor against the supplier etc.

It may be possible for the end user to put forward a claim against the building contractor, architect etc. for injury or damage for which they may incur liability under the general provisions of Danish legislation.

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What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

The purchasers, tenants and lending banks can only be protected in individual contracts with the developer. They are not protected by the construction contract.

If possible, purchasers, tenants and lending banks will record their contractual rights at the Land Registry and thus be protected from third-party rights.

If the client to the construction has appointed a designer, e.g. an architect, a third-party purchaser (the seller's buyer) can in certain circumstances have remedies, i.e. compensation as well as damages from respectively the employer and the designer.

If the employer is 'professional' later purchasers have wide-ranging claims for damages directly against the client.

Furthermore, a later purchaser who is a consumer can claim damages towards a professional construction inspector for defects in the construction that should have been uncovered by the inspector.

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What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

In Denmark, there is no specialized branch of the state courts exclusively for construction disputes. Instead, parties often agree to refer disputes to a specialist arbitration tribunal. By default, if no arbitration agreement is in place, construction disputes fall under the jurisdiction of the ordinary courts.

However, most sizable construction contracts in Denmark incorporate the AB 18 or ABT 18 conditions, which include an arbitration clause. The agreed forum is the Building and Construction Arbitration Court in Copenhagen (Voldgiftsnævnet for Byggeri & Anlæg). If adopted, any disputes between the parties are to be decided by this Arbitration Court, not the ordinary courts.

The Building and Construction Arbitration Courts decisions are final and binding. This means that in practice a large portion of construction disputes never go through the public court system at all, but are resolved in private arbitration under the specialist tribunal.

Last modified 17 Feb 2026

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

It is common in Denmark for construction disputes to be settled by arbitration rather than litigation. The standard form contracts AB 18, ABT 18 and ABR 18 all include arbitration clauses naming the Building and Construction Arbitration Court as the forum, and since these forms are widely adopted, arbitration has become the norm for complex construction cases.

Arbitration is more informal than traditional litigation. The Building and Construction Arbitration Court is a specialist body with deep experience in construction matters. Arbitrators often have technical or legal expertise in construction, so they offer a better understanding and competence in construction issues than a general court might.

Unlike litigation, which can take years, arbitration can usually be completed within a set time frame. Parties can also maintain confidentiality in arbitration, which is often desired in commercial disputes. However, litigation has the benefit of being less costly in terms of tribunal fees.

Yet in Denmark’s construction industry, the preference for arbitration is strong. It is entrenched by standard contracts and supported by the industry’s familiarity with the Arbitration Board. So, arbitration is more common than court litigation for construction disputes.

Last modified 17 Feb 2026

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

Alternative dispute resolution procedures beyond arbitration - such as mediation, conciliation, or other ADR - have historically not been widely used in Danish construction disputes, but recent developments have started to change this. There is no legal mandate requiring ADR as a first step. Mediation is not mandatory by law, but under the Danish dispute resolution procedure it is possible to settle the case through mediation.

However, the updated AB 18, ABT 18 and ABR 18 documents have introduced a “dispute resolution ladder” that encourages parties to resolve disputes through escalating steps before resorting to arbitration. Consequently, the parties are bound to try to resolve and settle a dispute on the lowest step of the “conflict ladder”. That is, the parties shall try to resolve and settle the dispute through negotiation before other steps can be initiated (mediation, speedy resolution or arbitration). The AB 18 “conflict ladder” thus typically runs: negotiation > mediation > (speedy resolution) > arbitration. These ADR steps are contractually required once a party triggers them. For instance, if mediation is requested, the other party must participate in good faith, and arbitration cannot commence until the mediation attempt is concluded.

Last modified 17 Feb 2026