Global menu

Our global pages

Close

Lawbite: Does conclusive really mean conclusive?

  • United Kingdom
  • Litigation and dispute management
  • Real estate
  • Real estate dispute resolution
  • Real estate litigation - LawBite

30-06-2020

Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd [2020] EWHC 1263 (Ch)

Even where a lease stated that a landlord’s service charge certificate was “conclusive”, a tenant could still challenge whether certain works fell within the landlord's repairing obligations, such that they could properly be claimed by the landlord by way of a service charge.

The tenant covenanted to pay a "fair and reasonable proportion" of the total service cost. At the end of each year, the landlord produced a service charge certificate showing the amount payable by the tenant, which the lease said was “conclusive” in the absence of manifest or mathematical error or fraud. The lease also prohibited the tenant from claiming any right to set-off or counterclaim.

When service charge sums fell outstanding, the landlord issued proceedings for the arrears and the tenant counterclaimed.  It alleged that some of the works were unnecessary, that some of the costs related to repair works which were outside of the landlord's repair obligations and that the cost of the work was increased by past failures to keep the premises in good repair.

The landlord appealed against a refusal to grant it summary judgment but the appeal also failed.

The High Court held that the certificate was conclusive as to the amount payable by the tenant.  This meant that it was conclusive as to “routine accounting matters”, absent manifest or mathematical error, or fraud but was not conclusive as to whether those costs were properly incurred in the first place, i.e. whether they actually fell within the scope of the service charge payable by the tenant under the lease.

Due to the no set-off or counterclaim provision, the tenant could not withhold the service charge if the service charge was properly due. However, if there was a dispute as to the service charge liability, the tenant’s obligation to pay depended upon the determination of that dispute (irrespective of certification).

Key points

  • Conclusive certification clauses are common in commercial leases. It is important to consider, however, what the certificate is conclusive of and this will depend on the wording of the lease in question
  • This case will be welcome news to tenants of commercial premises who may now be looking at the wording of their leases to decide whether it offers more opportunity to challenge a landlord’s service charge certificate than originally anticipated
  • The landlord has made an application for permission to bring a second appeal therefore watch this space…

For more information contact

< Go back

Print Friendly and PDF
Subscribe to e-briefings