202: Tenant successfully challenges service charge despite landlord’s certificate being ‘conclusive’

The High Court has held that a tenant could challenge whether sums were properly due under a service charge, despite the lease containing a clause making the landlord’s service charge certificate ‘conclusive’.

The tenant, Blacks Outdoor shops, had covenanted in its lease to pay a ‘fair and reasonable proportion’ of the total service costs. At the end of each service charge year, the landlord had to provide the tenant with a certificate of the amount payable by the tenant.

The lease stated that the ‘certificate was conclusive in the absence of manifest or mathematical error or fraud’ and prevented the tenant from claiming any right to set-off or counterclaim of sums due under the lease.

The landlord provided service charge certificates, but the tenant did not pay the sums claimed during the course of the next two service charge years as there was a dispute. The landlord issued proceedings for summary money judgment against the tenant. The tenant counter-claimed that some of the works paid for by the service charge were unnecessary, and that some of the costs related to repair works did not fall within the landlord’s repairing obligations.

The High Court held that the certificate was conclusive as to the amount of the actual costs incurred, absent manifest or mathematical error, or fraud. However, it was not conclusive as to the question of whether those costs fell properly within the scope of the service charge payable by the tenant.

It was not necessary to define exhaustively the circumstances in which a certificate was conclusive. It was sufficient to say that the certificate was not conclusive in relation to the matters raised by the tenant. The tenant was therefore entitled to challenge the sum claim by the landlord based on the certificates and the landlord’s appeal was dismissed.

This case is a useful precedent for a tenant where a landlord is relying on its own certification to prevent genuine disputes about the sums properly recoverable under the service charge.

Sara & Hossein Asset Holdings Limited v Blacks Outdoor Retail Limited [2020] EWHC 1263 (Ch), 2020 WL 02541992