GS Engineering and Construction has threatened to restrict residents' move-in if negotiations fail, demanding over 1 billion won in additional construction costs from the renovation association of the Cheolsan Jugong Complex 8 & 9, just three months before move-in. This is the third time GS Engineering and Construction has requested an increase in construction costs for this complex.
According to the maintenance industry on the 3rd, GS Engineering and Construction sent a document outlining its request for 1.032 billion won in construction costs to the renovation association of the Cheolsan Jugong Complex 8 & 9.
In the document, GS Engineering and Construction stated, "We are diligently proceeding with the construction to meet the scheduled move-in date in May," yet noted, "Since the groundbreaking in December 2021, we have faced unprecedented and severe changes in the construction environment, such as the COVID-19 pandemic, the Russia-Ukraine war, and soaring raw material prices due to U.S.-China tensions, leaving us in a serious situation where we cannot even achieve the purpose of the contract."
GS Engineering and Construction asserted that these changes in the construction environment are unpredictable and not the responsibility of either party to the contract, but the burden has been entirely on GS Engineering and Construction so far.
GS Engineering and Construction explained that "the additional construction costs are expenses incurred due to the requests from the renovation association of the Cheolsan Jugong Complex 8 & 9 and design changes, and despite GS Engineering and Construction investing additional construction costs, the association has repeatedly refused to negotiate without reason," adding, "If the negotiation on the adjustment of contract amounts is not completed by the time of move-in, restricting the move-in of association members will be inevitable."
The Cheolsan Jugong Complex 8 & 9 is expected to transform into the new apartment complex "Cheolsan Jayi The Heritage" with a total of 3,804 units, built from the redevelopment of the area around 235 Cheolsan-dong, Gwangmyeong, and will begin to see resident move-ins sequentially starting late May.
However, the renovation association and construction company GS Engineering and Construction are in conflict over the third request for the increase in construction costs just three months before move-in.
GS Engineering and Construction is requesting an additional 1.032 billion won in construction costs, including the design changes requested by the association last October, due to worsening external conditions for construction.
Earlier, GS Engineering and Construction signed a construction cost contract worth 877.6 billion won with the association in December 2019 and began construction on the complex in December 2021. Three years later, in February 2022, they requested an increase of 41.6 billion won on the existing construction costs, adjusting the contract amount to 919.2 billion won in the first adjustment. In December 2023, they executed a second contract modification, increasing the amount by 58.5 billion won to a total of 977.7 billion won.
Subsequently, GS Engineering and Construction requested a third adjustment to the renovation association, demanding a reconstruction of the construction cost contract, asking for an increase of 1.032 billion won from the second adjusted amount to 1.08 trillion won on the 22nd of last month.
In response, the renovation association stated that since they have already increased construction costs twice, the burden on the members would be too large, making it difficult to accommodate the increase of over 1 billion won in construction costs.
The complex association chairperson said, "We have already set the construction costs to reflect the inflation according to the contract, and we have increased the construction costs twice. While it is acceptable to increase it by about 10 billion won in light of the request made during the general sale in 2023 for specialized items, an increase of over 1 billion won is an unreasonable demand."
In the legal community, while increases in labor and material costs are generally seen as unavoidable, the COVID-19 pandemic and wars may be considered as cases of force majeure.
Im Sang-young, representative attorney at Theo Law Firm, noted that "if there is no special provision stating 'there is no increase in construction costs due to inflation,' from the perspective of the association that risks damage due to delayed move-in, some increase in construction costs is an unavoidable reality" but added, "The changes in construction costs resulting from design changes requested by the association will inevitably have to be reflected by the association."
A representative from GS Engineering and Construction mentioned, "Despite facing the unexpected COVID-19 pandemic, the Russia-Ukraine war, and conflicts in the Middle East, we are carrying out construction normally. However, we sought additional construction costs, including design changes, as a realistic solution," and stated, "Recent discussions have been held among Gwangmyeong City, the association, and ourselves through a construction cost dispute resolution committee, and we are making every effort to ensure smooth negotiations with the association to avoid any obstacles to move-in."