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Clacy v Sanchez [2015] UKUT 0387(LC): Certification Of Service Charge Not Necessary Or A Pre-Condition

Summary: (1) On the true construction of the lease, the ascertainment and certification of the service charge was not a necessary or essential pre-condition to the ability of the management company to seek payment of the service charge; (2) There had been a course of conduct which constitutes an equitable estoppel by precluding the lessees from seeking to assert that there should now be a certification process in accordance with the terms of the lease, or the lessees had waived any right to resile from the position that had been adopted throughout the period of 19 years or so both by themselves and their predecessors in title.

Facts: Clause 2(2)(ii) of a lease included a covenant on the part of the lessee “To pay to the Management Company without any deduction upon written demand (and in advance if required) an amount equal to the sum of the percentage of the general expense (such sum being here and after called “the service charge”) or any of the general expense and at all times keep the Lessor and the Management Company indemnified in respect of the same.” The provisions regarding the mechanics for preparing and serving a certified service charge account were prefaced by the words “Without prejudice to the covenant contained in clause 2(2)(ii) the following terms and conditions shall apply to the payment of the service charge by the Lessee …” The FTT accepted that there had been a meeting in around 1993 between the landlord and the previous leaseholders at which it had been agreed that certification of the annual service charge was not required.

Issues: (1) was the certification of the service charge accounts a condition precedent to the lessees’ liability to pay the service charge; (2) Was there an agreement giving rise to a common understanding, or assumption, between the parties that certification would not be required and, therefore, had an equitable estoppel arisen in the nature of an estoppel by convention?

Held: The UT (Judge Edward Cousins) held (1) The lease contained a primary obligation on the part of the lessees to pay to the management company upon written demand the service charge. The words “without prejudice” indicated the machinery for the payment of the service charge by the lessees, and the method by which the amount of such charges shall be ascertained and certified annually: the requirement for certification was therefore not an essential pre-requisite to the payment of the service charge by the lessees.  (2) There had been a course of conduct which constitutes an equitable estoppel by precluding the lessees from seeking to assert that there should now be a certification process in accordance with the terms of the lease, or the lessees had waived any right to resile from the position that had been adopted throughout the period of 19 years or so both by themselves and their predecessors in title.

 

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