Landlords will be pleased that a recent Court of Appeal decision has held that the tenant was unable to challenge the service charge due as the Landlords certificate was conclusive in respect of both the total cost and that the cost of those services had been properly incurred.
Under the service charge provisions in the lease, the landlord was required to calculate each year the total cost of the services and expenses. Once "such total cost and the sum payable by the Tenant shall have been ascertained", the landlord would give the tenant "a certificate as to the amount of the total cost and the sum payable by the Tenant and in the absence of manifest or mathematical error or fraud such certificate shall be conclusive". The lease went onto provide that "any dispute between the parties as to the proportion [of the total costs payable by the tenant] shall be determined by Expert Determination".
The landlord certified a much larger amount as due in 2017-2018 than it had in previous years. It subsequently issued proceedings for unpaid service charge. The tenant sought to challenge the sums claimed. The landlord applied for summary judgment on the basis that the certificate was conclusive
At first instance the judge agreed with the tenants interpretation and it was held that whilst the certificate was conclusive of the total cost of services, the issue of whether the individual items had been properly incurred in the first place was a separate matter. The landlord appealed.
The Court of Appeal overturned the judge at first instance. The landlord’s certificate was conclusive as to both the scope of the services included and the total costs payable by the tenant. The Court of Appeal could not see how the certificate could be conclusive as to the amounts incurred but not what should be included. Express words would be required if this was the not the intention of the clause. It was not for the Court of Appeal to save the tenant from bad drafting.
No doubt landlords will be relieved by this decision given the difficulties they face as a result of Covid whilst tenants will obviously be disappointed in terms of the discretion afforded to landlords on the issue of individual service charge items. Whether or not items can be included in service charge and whether a certificate is conclusive or can be challenged will depend on the specific wording in the lease. For advice in relation to this or other landlord and tenant matters contact Stuart Simoes on 020 4526 4987 or click here to email him.