A landlord’s service charge certificate was conclusive as to the sums payable by a tenant under a lease.
A landlord’s service charge certificate was conclusive as to the sums payable by a tenant under a lease.
The tenant (B) held a one year lease granted in 2018 which incorporated by reference the terms of an earlier lease granted in 2013. In relation to service charge, the leases provided that:
“The Landlord shall…furnish to 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 provided for expert determination if there was a dispute as to the proportion of the overall costs for the building payable by the tenant, but there was no equivalent provision if there was a dispute as to the amount of the landlord’s total costs.
The landlord (S&H) issued a certificate for the service charge year 2017/18 certifying that over £400,000 was due. This sum was substantially larger than in previous years (the figure for the service charge year 2016/17 was £55,000). B claimed, amongst other things, that the costs of some of the works included were unnecessary or were not strictly repair works (within the meaning of the relevant repairing covenants) and that the cost of the works was increased by past failures to keep the property in good repair.
The High Court decided that S&H’s certificate was conclusive as to the costs incurred in providing the services, but not as to whether it was entitled to charge for such services in the first place (otherwise, a landlord would, in effect, be a judge in its own cause).
Was the High Court correct in its interpretation of the relevant service charge provision?
The High Court’s interpretation was not correct. As a matter of ordinary language, the identification of the services and expenses properly falling within the service charge could not be separated from the total costs incurred in respect of those services and expenses. The service charge provision made S&H’s certificate conclusive as to the “total cost” and both elements make up that single figure. Any other interpretation would require either express words to that effect or a necessary implication. There were no such express words and no grounds for such a necessary implication.
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