Tenant can challenge service charge despite clause stating landlord’s certificate conclusive (High Court)

In Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd [2020] EWHC 1263 (Ch), the High Court held that a tenant could challenge whether sums were properly due under a service charge despite a lease clause making the landlord’s service charge certificate conclusive, absent manifest or mathematical error or fraud.

Blacks Outdoor Retail Limited (Blacks) was the tenant of commercial premises at Chicago Buildings, Whitechapel and Stanley Street, Liverpool.  Their landlord, Sara & Hossein Asset Holdings Ltd (S&H) applied for summary judgement because Blacks had not paid a service charge claim.  The service charge certificates had been provided.  Blacks’ objections included that the works were not properly repairs.

The lease provided that the landlord had to provide the tenant with a service charge certificate and the lease also stated that in the absence of manifest error or mathematical error or fraud, such certificate “was conclusive”.  It is not unusual to find such a phrase in leases.

The Deputy Master refused to grant a money judgment on S&H’s application for summary judgment and S&H appealed.

In Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd [2020] EWHC 1263 (Ch) the High Court considered whether the fact that the lease to Blacks stated that the service charge certificate was conclusive save for manifest error precluded the tenant’s defence that the sums so certified did not form part of the service charge and were not properly due under the lease.

The precise wording of the service charge certification in the lease to Blacks was for it to be of the amount payable by the tenant.  The High Court therefore held that the service charge certificate was conclusive as to the amount of the service charge but was not conclusive as to whether those costs actually fell within the scope of the service charge payable by the tenant under the lease.  S&H’s appeal was dismissed.

The judgement is based on the specific wording of the lease to Blacks but it makes us aware that the term “conclusive” does not by virtue only of its use apply to all matters and that both landlords and tenants should pay attention to which matters the landlord’s service charge certificate will be conclusive of.