Commercial landlords or tenants, are you wrongly charging or paying an insurance commission?

London Trocadero v Picturehouse Cinemas: Implications for Insurance Commission Recovery

The High Court’s decision in London Trocadero (2015) LLP v Picturehouse Cinemas Limited [2025] EWHC 1247 (Ch) provides important clarification regarding the recoverability of insurance commission by landlords from tenants. While part of a broader dispute concerning rent arrears, this specific ruling addressed whether landlords can pass on commissions received from insurance brokers to tenants as part of the insurance rent. The court determined that, under standard lease provisions, such commissions are generally not recoverable, with significant implications for all parties in the commercial property sector.

Case Overview

The case involved London Trocadero (2015) LLP, as landlord, and Picturehouse Cinemas Limited, as tenant, of premises within the Trocadero Centre in London. Under their leases, the landlord was responsible for arranging buildings insurance for the centre and recovering the costs from tenants through “insurance rent.”

Picturehouse challenged the insurance rent charged, asserting that the landlord had included undisclosed commissions and fees that inflated the cost. Specifically, the landlord had arrangements with its insurance broker where substantial commissions were charged, with a portion of these commissions rebated back to the landlord (referred to as “Landlord’s Commission”). Picturehouse contended that these rebated commissions did not constitute a genuine cost of insuring the property and should not have been passed on.

The High Court, in a counterclaim within the larger dispute, found in favour of Picturehouse regarding the insurance commission, despite the landlord prevailing on the separate claim for unpaid rent arrears.

The Court’s Decision and Rationale

Mr Justice Richards ruled that the landlord was not entitled to recover the “Landlord’s Commission” from Picturehouse as part of the insurance rent. This decision primarily rested on the interpretation of the lease wording, which permitted the landlord to recover sums “payable by way of premium for keeping the Centre insured.”

Implications for Landlords

The London Trocadero ruling necessitates a review of practices for commercial landlords:

• Lease Review: Landlords should examine existing leases to identify provisions concerning the recovery of insurance costs. Standard clauses permitting recovery of “premiums” are unlikely to suffice for recovering rebated commissions. Explicit and unambiguous drafting is required if such recovery is intended.
• Transparency: The judgment underscores the importance of transparent insurance arrangements. Landlords should provide clear breakdowns of insurance costs to tenants, including disclosure of any commission structures, to mitigate future disputes.
• Repayment Exposure: The decision may lead to tenants pursuing claims for historical overcharges where landlords have retained undisclosed commissions. Claims for unjust enrichment generally have a six-year limitation period, potentially resulting in significant repayment obligations.
• Revenue Streams: Landlords who have historically relied on insurance commissions as a revenue stream may need to reassess this practice. Income should primarily be derived from agreed rents and legitimate service charges.
• Broker Agreements: Landlords should scrutinize agreements with insurance brokers to ensure any commissions received are justifiable and reflect actual services, rather than being a mechanism for profit at the tenant’s expense.

Implications for Tenants

For commercial tenants, this ruling provides significant clarity:

• Right to Scrutinise: Tenants now have a clear legal basis to challenge insurance charges that incorporate undisclosed commissions. They are entitled to request comprehensive details of insurance policies, including net premiums and any commissions paid or rebated.
• Potential for Recovery: Tenants who believe they have been overcharged due to landlord commissions may have grounds for a restitutionary claim to recover those sums, potentially for up to six years of past payments.
• Negotiating Position: This judgment strengthens tenants’ positions during lease negotiations, enabling them to advocate for clearer and more transparent insurance clauses that prevent landlords from profiting from insurance arrangements.
• Ongoing Diligence: Tenants should conduct thorough due diligence on insurance provisions in new leases and consistently monitor insurance charges throughout the lease term.

Conclusion

The London Trocadero (2015) LLP v Picturehouse Cinemas Limited (2021) decision clarifies the principles governing the recoverability of insurance commissions in commercial leases. It reinforces the importance of clear contractual terms and the equitable principle of unjust enrichment. Landlords generally cannot pass on insurance commissions received from brokers to tenants unless expressly permitted by the lease. Both landlords and tenants are advised to review their lease agreements and insurance arrangements to ensure compliance and promote transparency in their commercial relationships, thereby potentially avoiding future disputes and financial liabilities. At the time of writing we await confirmation on whether the Claimant will appeal.

If you would like any advice on the issues raised in this blog please contact Lucy Taggart.