The Supreme Court held in the recent case of Sara & Hossein Asset Holdings Limited v Blacks Outdoor Retail Limited [2023] UKSC 2 that a statement in the service charge clause of a commercial lease that the landlord’s certificate of the total cost and sum payable by the tenant by way of service charge is conclusive did not prevent the tenant from disputing its service charge bill at a later date.

The majority judgment held that, although the lease specifically used the word “conclusive”, it did not state in which way the landlord’s certificate was to be conclusive. The creative judgment meant that the landlord’s certificate was indeed conclusive as to the amount that the tenant had to pay. The landlord was therefore entitled to payment as per its certificate. However, payment of the certified sum did not preclude the tenant from later being able to challenge its liability for that sum. This was summarised as a “pay now, argue later” compromise which gave effect to the landlord’s entitlement to seek recovery of its service charge costs from the tenant whilst also preserving the tenant’s rights in the lease to inspect the landlord’s service charge receipt and to subsequently dispute the certified service charge liability.

In reaching its majority decision, the Supreme Court arrived at a conclusion that neither party had requested. Nonetheless it is regarded as being a pragmatic decision that seeks to balance the interests of the landlord and the tenant. In conclusion, where a lease so specifies, a landlord’s service charge certificate is conclusive as to the amount of service charge payable by the tenant. The tenant must pay the amount stated in the certificate and is not allowed to exercise any set off. The tenant does however retain the right to challenge the certificate after payment and, if successful, claim a rebate.

Please note that this information is provided for general knowledge only and therefore specific advice should be sought for individual cases. 

For further information, please contact Philip Mundy