Read the Lease!

In Akorita v Marina Heights (St. Leonards) Limited a long leaseholder refused to settle service charge demands because the freeholder failed to comply with a term of the lease when submitting the demand.

Akorita’s main argument was that service charges are only payable when the amount to be paid has been properly certified by the freeholders surveyor, in this case no such certificate had been provided.

The clause in question read:

“To reimburse to the Lessor a sum (hereinafter referred to as “the Service Charge”) equal to one seventh (or such other proportion as may be determined by the Lessor’s Surveyor depending upon the number of Units eventually using the access drains or other communal parts) of the costs expenses outgoings and matters mentioned in the First Schedule hereto the Service Charge to be due and payable on demand and the amount of the Service Charge to be ascertained and certified by the Lessor’s Surveyor acting as an expert and not as an arbitrator once a year up to the Thirtieth day of June in each year (or if such ascertainment shall not take place on the Thirtieth day of June then the said sum shall be ascertained as soon thereafter as may be possible as if such sum has been ascertained up to the Thirtieth day of June aforesaid) commencing on the Thirtieth day of June”.

The Upper Tribunal held that on the proper construction of the above clause it is a condition precedent to any liability of Akorita to make payment either on account of service charge or by way of a final balancing service charge payment once Marina Heights has obtained a certificate. Therefore in the absence of a certificate Akorita had no service charges to pay and until the certificates are obtained the liability will remain nil.

Given that Marina Heights had lost the appeal the Tribunal also made an order preventing them from recovering any costs through any future service charge demands pursuant to a clause in the lease. This decision was also no doubt based on the fact that Marina Heights had insurance cover for the costs.

I think the title says it all and its Friday so no sermons.

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