Landlord not entitled to charge its insurance commission to its tenant

In the recent case of London Trocadero (2015) LLP v Picturehouse Cinemas Ltd and others [2025] EWHC 1247 (Ch), a tenant has successfully argued that the landlord was not entitled to charge the tenant insurance commission as part of the insurance rent, which was rebated to the landlord as part of an agreed ‘kick back’ with the landlord’s brokers, principally as the commission did not form part of the premium payable for keeping the building insured.

The High Court’s decision was based on the specific insurance rent provisions in the lease. The decision does not have the effect of prohibiting commission rebates (which are not uncommon), but it does make clear that a landlord cannot seek to benefit at a tenant’s expense by relying on standard lease terms. The case also involved a breach of health and safety obligations by the landlord, which impacted upon the insurance premium sums.

What was the issue around insurance rent commission?

The case formed part of what was previously a wider dispute concerning the claim by the landlord for recovery of arrears, which included amongst other sums, the annual rent and insurance rent. The case concerning the arrears was dealt with by way of summary judgement in favour of the landlord, but during that claim the tenant raised a counterclaim concerning the insurance rent.

• London Trocadero (2015) LLP (the landlord) had owned the freehold interest in the Trocadero Centre (the Centre) in London since 2015
• As part of the lease, the landlord was required to insure the Centre and was entitled to recover the costs of doing so proportionately from each occupational tenant
• The landlord had negotiated a significant commission with its insurance broker, which it then charged proportionately to the tenant as part of its insurance rent demand
• In the insurance year 2022/2023, the landlord charged a 35% insurance fee instead of the insurance commission
• For several years the landlord’s insurers required a higher excess as well as a 10% co-insurance clause which was in part due to fire safety concerns at the Centre.
• The tenant argued that it had been overcharged insurance rent on the following three grounds:

1. The premium issue – The insurance provision in the lease stated the “premium payable by [the landlord] for keeping the Centre insured”. The tenant argued that this did not entitle the landlord to include in the insurance rent the commission that was paid back to the landlord. The tenant also argued that it was not obliged to pay the landlord’s insurance fee of 35% that the landlord levied in addition to the insurance premium in the insurance rent year 2022/2023 (instead of the commission the landlord charged in the previous years).
2. The safety obligations – By failing to maintain a sprinkler system at the Centre, the landlord was in breach of its obligations under the terms of the lease and, further, that this failure resulted in a significant increase in the insurance premium, which the tenants should not be responsible for
3. The excess issue – The tenant was only required to pay insurance rent for insurance that covered “the full costs of rebuilding or reinstating the Centre against loss or damaged by the insured risks”. The tenant argued that due to the landlord’s poor fire safety controls at the Centre, the insurers required a significant excess and/or co-insurance clause.

What did the High Court decide in regards to the insurance rent?

The judgement found that:

• The landlord was not entitled to charge in the insurance rent, either the amounts attributable to the commission, or its insurance fee of 35% and the tenant could recover these sums by way of restitution as the landlord was unjustly enriched by charging these sums
• The commission did not form part of the cost of keeping the Centre insured, as it was repaid to the landlord
• The commission was negotiated to allow the landlord to profit at the tenant’s expense and was not paid as consideration for any services provided by the landlord
• There was no contractual right in the lease for the landlord to charge the 35% insurance fee to the tenant. Whilst the landlord was in breach of its obligations to maintain suitable firefighting equipment, the landlord was not in breach of its insurance obligation by agreeing to higher excess and a 10% co-insurance clause in the insurance policy. Subsequently the tenant could not recover the excess that was charged on the insurance policy.

What does the ruling on insurance rent mean for landlords going forward?

This case highlights a number of areas where landlords should take care. They need to be cautious if commission arrangements could be construed as the landlord making a profit at a tenant’s expense. In addition, landlords should consider being transparent with the tenant where commission arrangements are relevant.
They should also make sure that the insurance provisions in the lease are clearly worded i.e. do not rely on ‘standard terms’ to try and recoup sums which are over and above market standard arrangements. It is advisable to seek specialist legal advice prior to negotiating new lease terms. Our Real Estate team has extensive experience in helping landlords negotiate leases. Please get in touch if you have any questions.