204: Decision reversed – tenant could not challenge service charge as certificate was conclusive

In our recent blog post, we reported on the decision in Sara and Hossein Holdings Asset Limited v Blacks Outdoor Retail Limited [2020] where the High Court held that a tenant could challenge whether sums were properly due under a service charge.

The Court of Appeal has overturned this decision and concluded that the tenant could not successfully challenge the service charge.

A clause in retail leases granted to Blacks Outdoor shops, which stated that the landlord’s service charge certificate was conclusive (absent manifest or mathematical error), was held to be enforceable. The Supreme Court found that the landlord’s service charge certificate was conclusive in respect of two issues, namely:

• the amount of the total cost incurred; and
• the itemised sums payable by the tenant.

These two issues could not be separated. The lease contained clear wording that the service charge certificate was to be conclusive and this was meant to cover both of the above limbs. Blacks agreed the wording of the lease and the Supreme Court felt it should have included an express clause if it only meant for the second limb above to be included.

Whilst this decision will be disappointing to tenants, commercial landlords will breathe a sigh of relief that they will avoid a flood of claims challenging whether service charge costs have been properly incurred.