Service Charges: Interpretation of ‘conclusive’ lease wording in service charge dispute (Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd – 2020)

In an application for summary judgment relating to a claim for service charges, was the Deputy Master at first instance correct to refuse to grant a money judgment in favour of the landlord through its interpretation of the word ‘conclusive’ comprised in the lease?

The background

In Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd [2020], the tenant held a lease of commercial premises in Liverpool. The landlord had supplied service charge certificates but the tenant had not paid the sums demanded on the grounds that works did not constitute ‘repairs’.

Under the terms of the lease, the landlord covenanted to supply service charge certificates which were to be deemed conclusive save for manifest error or fraud. Certificates were to set out the amount of the total cost and the sum payable by the tenant.

The landlord made an application for summary judgment, which was refused by the Deputy Master, and the landlord subsequently appealed. The High Court was asked whether the lease wording took priority over the tenant’s response that the certified sums were not properly due by way of service charge.

The decision

The High Court rejected the appeal, finding in favour of the tenant. In assessing the specific wording under the lease, the certification of service charge was to be of the amount payable by the tenant; the certificate therefore was conclusive as to the total amount payable, but not in respect of whether costs were properly incurred or fell within the service charge scope for which the tenant was liable.

Blacks was entitled to challenge whether certain works could be claimed by the landlord under the service charge, and such challenge could not be dismissed summarily simply on grounds that it had no success.

The claim was allowed to proceed to trial.

Advice and action for landlords

Landlords are advised to ensure that lease wording is of the greatest clarity, with the understanding that tenants may contest claims made. Although service charge certificates may be conclusive in terms of amount, they are not necessarily conclusive in respect of the ‘payability’ of particular service charges, and tenants may proceed to make a claim on this basis where they can present a case.

Landlords may well be wary of this robust approach, which has been reflected in similar recent cases including Raja v McMillan [2020] and Media v Karyagdyyev and Garcia [2020].