It’s an age old story: One rich man decides that another rich man has money he wants, or wants money he has, so they both hire lawyers and live miserably ever after. One the surface, that’s

exactly what this looks like (and I suppose that’s what it is), but on closer inspection you’ll see that this could have repercussions that affect everybody who rents or leases, be it an

office or a flat (though it does especially affect leases, and I’ll explain why). The scale of the dispute, and the companies involved, is a big factor. Mckinsey, the defendant, is a huge

management consultancy firm that recently charged the UK government £560,000 to spend SIX WEEKS to create the ‘vision, purpose and narrative’ and England’s public health authority. Criterion

that every case provides a precedent for the previous case. In practice, the larger cases, with more public attention, are the ones that are generally prioritised as precedents because they

carry more weight. This case is large so it made the Financial Times, and making the Financial Times makes it prominent and public. Okay, but how does that affect you, as a renter or lease

holder? What does a precedent matter? Surely there are already laws about this kind of thing? Well… The specific dispute here is with regards to the service charges. Criterion says Mckinsey

owes them £2.2 million in service charges for offices they moved out of in 2019. Mckinsey say they do not. Why is there confusion? Because there’s no actual law with regards to how much a

landlord can charge with regard to service charges. While in theory it’s not supposed to be run for profit, just basic maintenance on the building, in practice it usually depends on the

tenants ability to complain. Mckinseys’ argument is thus: * The service charges ‘do not reflect a due proportion of the services provided’ * Criterion failed to operate a sufficient sinking

fund * Criterion undertook £1m of repairs and redecoration work in 2017–18 that was ‘generally unnecessary and premature’ So what the hell does that mean? The first point is deceptively

simple: Mckinsey claims that Criterion overcharged them. They have paid more than was required to maintain the building. The second point is why lease holders should pay attention, as rent

agreements don’t tend to have sinking funds as commonly as leases: Mckinsey says that Criterion wouldn’t have needed to charge them had they properly maintained a sinking fund, used to pay

for high-ticket repairs such as lifts, etc. The third point is that Criterion went to unnecessary expense in maintaining and redecorating the building. So how does this impact on the rest of

us. Well it seems that so far there could be three outcomes: * One: Mckinsey wins on technicality. Basically, they get some data that proves they were overcharged and Criterion has no way

to dispute. This probably won’t result in much change, but is unlikely. * Two: Mckinsey wins on principle. The court decides that Criterion should have managed their finances and repairs

better and finds for Mckinsey. Ironically, this may actually result in slightly more costly rents and leases in the short-term as businesses look to shore up their sinking funds and hire

more people to manage building evaluation. In the long run, however, rent service charges will probably be mildly reduced as landlords make sure they’re not liable for being overcharged, and

while lease service charges won’t drop, there will be fewer ‘surprise’ service charge increases for certain failures as better managed sinking funds cover the damage. * Three: Criterion

wins. In this instance, unscrupulous landlords may become more confident in trying to increase service charges through bogus ‘redecorations’, then point to this case when fighting against

disgruntled tenants. Renters may also have a harder time fighting landlords on increased service charges. For the more honourable landlord, however, it means that wealthy, upstart tenants

are less likely to try and exploit loopholes in perfectly reasonable contracts. Regardless of what happens, this has been dragging on for a long time, and both sides have the money to drag

it on for far longer. By the time it’s resolved, it may have lost all of it’s impact. By that time however, no doubt a similar dispute will arise, and the wheel will turn and turn. Hope this

helps you, Jack