London Trocadero v Picturehouse
Cinemas: Warning for landlords as recent High Court decision required landlord to repay unlawfully charged insurance commissions to tenant

By Isabella Mason

Solicitor

25 June 2025

Insights News

Background

A recent decision in the High Court considered the issue of whether a landlord was entitled to charge a tenant insurance rent which consisted of not only net insurance premium, but commissions for the landlord’s broker and the landlord. The decision is significant and has wide implications for landlords and tenants.

The tenant sought repayment of landlord commissions paid to the landlord as “insurance rent” since 2015, arguing that it was not contractually obliged to pay these sums and, as such, the landlord had been unjustly enriched at its expense.

The tenant’s counterclaim related to three central issues, but the primary issue was whether the commission formed part of a “premium payable [by the Landlord] for keeping the Centre insured”.  The tenant did not dispute liability for the net premium or the broker’s commission.

The tenant was successful, and the landlord was ordered to repay over £700,000 to the tenant.

How the landlord benefitted from a commission

The landlord (via its managing agent) negotiated with the insurers a level of cover which included a landlord commission that would be paid from the insurers to the broker. The insurers reflected the landlord commission in the total commission that was paid to the brokers and increased the premium accordingly. The insurer would ostensibly pay the commission to the brokers, the broker would take their agreed fee, but the remainder was ultimately passed to the landlord as commission. As this resulted in an inflated premium payable by the landlord, to cover such sum, the landlord increased the insurance rent that was charged to the tenant.

The expert evidence given to the Court revealed that landlord commission of up to 37.5% was “not unusual” at the time of the lease and in fact is a widespread practice.

The Court’s findings

The Lease

In deciding this question, the starting point is to have regard to the wording of the lease.

Within the lease, the tenant covenanted to pay insurance rent, namely a “proportionate part of the total sum… equivalent to the amount from time to time assessed…as being payable…by way of premium for keeping the Centre insured for an amount…necessary to cover the full costs of rebuilding or reinstated the Centre against loss or damage by the Insured Risk”.

It is accepted that the “gross premium” payable by the landlord comprises the:

1. “net” premium (the cost to insure the building);
2. the broker’s commission (fee for arranging the insurance); and
3. landlord’s commission (amount of commission remaining once the broker’s fee has been paid).

Whilst technically speaking the landlord commission forms part of the “gross” premium; on a strict interpretation of the clause in the lease, the Court found that the landlord was not entitled to charge the commission it received as part of the insurance rent. The lease limited the tenant’s insurance liability to the sum payable by the landlord for keeping the Centre insured. Even if the commission was ostensibly payable by virtue of being a component of the premium, its purpose was not for keeping the Centre insured, but rather it provided the landlord with an opportunity to profit at the tenant’s expense.

Implied terms

In case the Judge was wrong in his analysis that commission could not be recovered as insurance rent, he implied a term that would ultimately limit the amount of insurance rent that a landlord could charge a tenant. As such, this would prevent the landlord being able to arbitrarily charge the tenant the landlord commission solely for the landlord’s benefit at the tenant’s expense.  

Key takeaways

• Whether a landlord commission is recoverable as insurance rent is dependent on the terms of the lease.

• Terms may be implied into leases that only entitle a landlord to demand sums as insurance rent to the extent that such sums are representative of the market rate and represent insurance contracts negotiated at arm’s length.

• The payment of the landlord’s commission by way of insurance rent was not a feature of the commercial landscape in 1994 (when the lease was entered into). That said, commercial practices will not dictate an entitlement to charge landlord commissions.

• The tenant was able to recover the sums (going back up to 6 years and potentially up to 12 years), previously paid on the basis that the landlord had been unjustly enriched.

Implications of the case

The practice of charging tenants insurance rent consisting of commission may resonate with many landlords as this is a common practice in the property landscape.

Even if a landlord does charge commissions in line with industry norms, this does not preclude the tenant claiming overpayments from the landlord. The starting point is to analyse the wording of the lease.

This case leads the way for a potential flurry of tenant overpayment claims by way of restitution.

Tips for landlords

• Review property portfolios and seek advice on whether the provisions under the property leases allow you to recover insurance commissions as “insurance rent”.

• Your tenant may ask for disclosure of any commissions received – ensure you have this information available, whether it is you or a managing agent that arranges the insurance.

• Consider including a clause in leases that allows for recovery of the landlord commission by way of the insurance rent, although expect tenants to object to such clauses.

Tips for tenants

• Check your lease to see if landlord commissions can be recovered as “insurance rent”.

• Ask landlords to disclose the amount of commission that has been or is being received under insurance arrangements.

• Whilst not legally binding, the Code for Leasing Business Premises, England and Wales 2020 states that a landlord should disclose to tenants whether it benefits from insurance commissions and should pass on to tenants the benefit of any discounted premiums.

• If tenants believe they have been overpaying insurance rent, they should act quickly as there are strict time limits to bring a claim against a landlord. To bring a claim in restitution, tenants have 6 years to do so from when the insurance was paid. If the lease allows for recovery of an overpayment, a tenant has 12 years from when the insurance was paid.

Whether you are a landlord or tenant, it is vital to review any lease you are party to, so that you know where you stand with insurance commissions. If you require any guidance on this subject or for advice please contact Taylor Walton’s property litigation team here.

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Please note that the contents of this article are intended solely for general information purposes and should not be considered as legal advice. We cannot be held responsible for any loss resulting from actions or inactions taken based on this article.