Tall & Urban News

Since the evacuation of Opal Tower at Sydney’s Olympic Park, Construction giant ICON claims it has spent AU$24 million (US$16.2 million), despite putting only AU$1 million (US$6.74 million) aside as a “provision for defects.”

Financial statements reveal ICON, the company that built the tower, was holding just AU$1.09 million (US$7.35 million) in the fund for its entire portfolio of buildings across NSW.

The Christmas Eve evacuation of the Tower happened just months after the building opened its doors. All 392 apartments in Opal Tower were evacuated when cracks were spotted in the building and residents were forced out of their homes and into temporary accommodations.

Many builders have funds to cover defects, however one expert said the “very modest amount” ICON had put aside was indicative of the under-regulated industry and an example of why reform was needed.

Currently, 15 owners are still locked out of their apartments as rectification works continue. Some owners have launched a class action law suit against the State Government.

ICON has claimed that the “Opal Tower event” was insurable, however it did not reveal how much of the AU$24 million (US$16.2 million)—which also includes an amount spent on housing residents in temporary accommodation—it was planning to claim.

It said the bill to repair Opal Tower would not come out of the defects fund listed in its financial results.

ICON is broken into state-based companies, with the NSW arm reporting AU$163.4 million (US$110.2 million) in revenue for 2018, well down from the AU$335.3 million (US$226.2 million) it reported in 2017. It banked an AU$1.63 million (US$1.10 million) net profit in 2018, down from AU$6.8 million (US$4.59 million) in 2017.

Across the company, ICON estimates an AU$1.7 billion (US$1.15 billion) project pipeline this year.

An ICON spokesperson said the company’s approach to Opal Tower “cannot be questioned,” adding “[This is] all without admission of liability.”

The Opal Tower situation triggered a domino effect across the NSW industry, with a parliamentary inquiry into the regulation of building standards wrapping up yesterday.

Strata law expert David Bannerman’s firm Bannerman Lawyers has represented clients in more than 300 cases. He said the NSW industry’s issues came down to the lack of mandatory home warranty insurance. Home warranty insurance is taken out by a builder on behalf of the owners and covers the costs of repair of defective or unfinished works when the builder has disappeared, died or become insolvent.

But if a building is more than four stories high, it is not required. “If that insurance was in place [it] wouldn’t be the debacle it is today,” Bannerman said.

But Bannerman said the “modest amount” Icon set aside for defects reflected the way the industry worked.

“Buildings are not going to be faultless, they don’t come off a manufacturers plant and there’s always going to be something wrong to come and fix up,” Bannerman said.

But usually what happens is the builders just lean back on the subcontractors and say, ‘I need you to fix this for me or I’m not going to give you the next job.’

“A big part of that [provision for defects fund] would be for what the subcontractors can’t complete.”

For more information on this story, visit ABC Australia.