Block management - Reasonableness v The Lease - Dewar Hogan

Dewar Hogan Dewar Hogan Dewar Hogan Dewar Hogan Dewar Hogan

Block management - Reasonableness v The Lease

Block management – Reasonableness v The Lease

Block management – Reasonableness v The Lease

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The recent case of Mr Iouri Chliafchtein and his dispute over services at 3-10 Grosvenor Crescent, London SW1 proves once again the oldest and most ignored adage in property management – always read the lease.

Mr Chliafchtein owns an £18 million apartment in Grosvenor Crescent, one of several in a converted building at 3-10. There was the usual set-up with a management company which covenanted in the lease to do various things, and each tenant covenanted to pay their share of the cost of those things through the service charge.

It seems that there came a time when the residents were unhappy at the high level of these service charges. The management company, in a sense, behaved in an exemplary manner – it sent round circulars informing the residents and seeking opinions, canvassed widely, and in the end decided to reduce the number of concierges that it employed, in accordance, it thought, with the majority opinion of the tenants.

Mr Chliafchtein was not happy. He went to court seeking an order that the management company change its decision. Sometimes his fishmonger was unable to deliver in time for lunch, he complained. And at other times there was no employee available to drive his car round to the front of the building for him.

The press enjoyed all that, of course, but the fact is that Mr Chliafchtein won his case, although not before each side had spent £150,000 or so in legal costs.

And why? The simple fact was that the management company had covenanted to provide certain services – in particular to provide ‘Designated Parking Officers’ precisely in order to drive residents’ cars to and from the parking areas, and to provide a 24-hour concierge service. It’s true that service charges have to be reasonably incurred and reasonable in amount in order to be recoverable, but that doesn’t alter the fact that a party which has contracted to provide a service simply has to provide that service, and a party which has contracted to pay for it simply has to pay for it, and that’s all there is to it. It doesn’t matter whether some hypothetical reasonable person might think the service doesn’t need to be provided, or for that matter whether every other tenant of the block reasonably thinks the service isn’t necessary. If there is a covenant to provide it, then it has to be provided. If you will, it cannot be unreasonable to provide what you have covenanted to provide.

So, for management companies, the moral of this tale is the oldest one of all. Read the lease, and do what’s in it, and you won’t go wrong. It would be interesting to know who is going to foot the £300,000 bill the management company will be saddled with as a result of its failure to follow this simple precept.