McKinsey disputes payments to former London landlord

09 September 2020 2 min. read

Global management consultancy McKinsey & Company is being sued by the company that owns London offices it occupied until last year. The company is alleged to have failed to pay property charges for the One Jermyn Street offices it had occupied since 1993.

McKinsey & Company is the world’s largest strategy consulting firm, and has had a presence in the UK since 1959, when it launched its first office in the nation’s capital city. The intervening era saw McKinsey expand to three offices in the UK – all in London – offering strategy consulting services to blue chip clients, from top corporations to the British Government. After 25 years at one of those sites – One Jermyn Street – McKinsey decided that the time is right to relocate in 2019.

McKinsey moved into new London offices at the Post Building, on London’s Museum Street last year, a site is located in the city’s ‘Knowledge Quarter’ – a cluster of over 100 academic, cultural, research, scientific and media organisations. Now, however, the firm faces the prospect of having to revisit its time in Piccadilly, with the news that the owner of the Jermyn Street office has filed a lawsuit with London’s High Court – suing McKinsey for roughly £2.2 million.

McKinsey disputes payments to former London landlord

As reported by the Financial Times, Criterion Buildings has alleged that McKinsey failed to pay service charges due under the terms of its lease, which it held since 1993. McKinsey has meanwhile confirmed it will be defending the case, having stated that there is no money owed. The consultancy’s defence filings disputes the service charge demands of Criterion, and while it admits it has not paid the sums demanded, McKinsey denies it was under an obligation to pay them.

McKinsey’s defence read that “the purported service charge… does not represent a due proportion of costs reasonably and properly incurred by the claimant in providing the services and defraying the costs and expenses.”

The filing added that McKinsey was “not liable for the sums claimed in these proceedings” because they “do not reflect a due proportion of the service provided.” Meanwhile, the company said in the court papers that since June 2014, it had withheld payment of part of the demands made by the claimant “but nevertheless paid the sums which, from time to time, were properly due and owing.”

Elaborating on why it should not be liable for the charges Criterion invoiced it, the consultancy alleged that Criterion failed to operate a fund for the costs of maintenance and the replacement of equipment in the building such as lifts. This meant “that the claimant’s demands have exceeded the amount which the defendants are properly liable to pay.” On top of this, Criterion is claimed to have commenced £1 million of maintenance work to the building in 2017-2018 which McKinsey believed was “generally unnecessary and premature,” claiming it should not be required to contribute to the cost, given its lease expired in 2019.