The Supreme Court has handed down its decision in Sara Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd [2023] UKSC 2.
In 2018, following the early termination of a previous lease, Blacks Outdoor Retail entered into a further one year lease with its landlord, Sara Hossein Asset Holdings, expiring in May 2019.
The Dispute
A dispute arose concerning service charge certification. Did it prove service charge liability, or was it just evidence that the tenant could challenge?
The Background
- Blacks Leisure refused to pay the 2017/18 and 2018/19 service charges.
- Sara Hussein issued debt proceedings, and applied for summary judgment.
- The application was dismissed by the High Court, and granted by the Court of Appeal.
- Blacks Leisure appealed to the Supreme Court.
The Arguments
Blacks Leisure
Certification required the landlord to identify the services provided during the relevant period, state the total costs incurred, and determine the amount payable, taking into account deductions. Since invoices and receipts were produced after the certificate was issued, the certificate could only prove what was spent, not what Blacks Leisure was liable to pay.
Landlord
Certification was stated in the lease to trigger liability unconditionally, and so imposed an obligation to pay which the tenant could not challenge.
The Decision
The Supreme Court decided by a 4:1 majority that the certification should be interpreted as being conclusive.
That said, whilst Blacks Leisure had to pay, it was allowed to pursue a counter-claim for reimbursement of those amounts which it disputed as payable.
Comment
The decision does not really assist landlords or tenants.
In a number of landlord and tenant cases, there is a tension between what a lease says, and what should be implied to make it workable.
The strict reading of a term may be unfair to one party, usually the tenant, but the courts are reluctant to save it from a bad bargain.
Whilst the landlord succeeded in terms of compliance with the lease, it did not prevent the service charge being challenged for more than just manifest or mathematical error, or fraud, which is what it wanted to avoid.
Blacks Leisure meanwhile, can challenge the service charge, after paying it first.
Unless it is settled first, that challenge will be litigated in the High Court, which will mean more cost and aggravation.
Perhaps if the lease contained an expert determination clause none of this would have happened.
