The High Court has provided valuable guidance for both landlords and tenants on how insurance rent should be calculated and charged under commercial leases.
The background to insurance rent commissions
The case in focus is London Trocadero (2015) LLP v Picturehouse Cinemas Ltd [2025] EWHC 1247 (Ch). The case centred around London Trocadero LLP, the landlord and freeholder of the Trocadero Centre in London, and Picturehouse Cinemas Ltd, the tenant. Initially, the dispute arose when the landlord brought a claim to recover rent arrears. In response, the tenant filed a counterclaim stating that sums, specifically relating to insurance rent, that the tenant had previously been paying, were actually not recoverable under the lease.
The property was let under two leases, dated 1994 and 2014. Under the 1994 lease, the Landlord covenanted to arrange insurance for the property and was able to recover the associated costs proportionately from each of the tenants in the building.
The issue for the tenant
Picturehouse Cinemas Ltd argued that for years they had been ‘overpaying’ insurance charges (as insurance rent) as the charges included a landlord’s commission. The commission is an arrangement which involves the insurance broker inflating the insurance premium (payable by the tenant(s)) and then the excess “commission” element is rebated to the landlord. Picturehouse Cinemas Ltd paid significant amounts for the insurance charges (including a commission proportion) over the years and the court judgement showed that some years the landlord was rebated over 50% of the total insurance charge by way of commission.
Additionally, during the year 2022/2023, the Tenant paid 35% on top of the sums thew landlord sought to recover as insurance rent which was described as ‘A placement, administration and work transfer fee’.
The ruling
Ultimately, the judgement concluded that based on the express wording in the Lease, any ‘landlord’s commission’ was not an amount ‘payable by way of premium for keeping the centre insured’. Moreover, the lease only permitted recovery of the actual premium paid to insure the premises.
The Court also ruled that the 35% administration fee did not fall within the lease’s definitions of recoverable costs, so was not recoverable by the landlord from the tenant.
London Trocadero Ltd were ordered to reimburse the tenant under the law of restitution. The landlord’s years of profiting by way of these commissions from the insurance rent payments were deemed unjust enrichment.
What does this case mean for landlords and tenants?
This case will serve as a cautionary tale for landlords when drafting future leases. Precision is crucial, particularly if they intend on seeking additional costs recovery through the insurance rent payments. If landlords are not specific enough, this could lead to payments being deemed unrecoverable.
For tenants this case should highlight the importance of reviewing in detail, all insurance rent invoices and the relevant lease terms. If in doubt, tenants should be seeking professional guidance regarding the landlord’s recoverable costs under the lease.
Overall, the judgement reinforces the necessity to be transparent in how insurance rent is calculated and be aware of any lease imposed restrictions on what can be recovered. Both landlords and tenants ought to analyse their current and historic leases in case such charges/commissions are challengeable and also consider the applicable limitation period, which may affect any potential claims for repayment.
It should be noted that the landlord in this case has now obtained permission to appeal so we continue to monitor this case with interest.
How Moore Barlow can help
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