Jessica Anderson is senior associate at Hunters Law
The High Court’s Decision in London Trocadero (2015) LLP v Picturehouse Cinemas Ltd and others [2025] EWHC 1247 (Ch)
A recent High Court ruling in London Trocadero (2015) LLP v Picturehouse Cinemas Ltd and others [2025] EWHC 1247 (Ch) has marked a significant moment in landlord-tenant law, particularly in the realm of insurance rent. The case underscores the limitations on a landlord’s ability to recover insurance costs from tenants and clarifies the legal consequences of retaining insurance commissions without disclosure. The decision is already sending ripples through the commercial property sector, especially for landlords who rely on insurance commissions as a hidden source of profit.
- Background to the Dispute
The dispute arose in the context of the Trocadero Centre in London, a major mixed-use commercial property with numerous tenants. The landlord, London Trocadero (2015) LLP, was responsible for arranging buildings insurance for the Centre. The leases permitted the landlord to recover the cost of this insurance as “insurance rent,” charging tenants a share of the premium proportionate to their occupation.
However, the landlord had arranged the insurance through brokers who returned significant commission payments – in one year exceeding half of the gross premium – directly to the landlord. Despite receiving these rebates, the landlord continued to charge the tenants the full gross premium, treating the entire sum as recoverable insurance rent.
Picturehouse Cinemas Ltd, one of the tenants, challenged this practice. The tenant argued that it should not be liable for insurance rent calculated on sums that were, in substance, not borne by the landlord, since substantial amounts were effectively refunded via commissions. The tenant sought recovery of the overpaid insurance rent through a restitutionary claim for unjust enrichment.
- The High Court’s Decision
The High Court found in favour of the tenant, concluding that the landlord had no contractual entitlement to recover the full gross premium when a substantial portion had been returned to it in the form of commission. Central to the Court’s reasoning was the interpretation of the lease wording, which permitted the landlord to recover the “premium payable… for keeping the Centre insured.”
The Court held that this phrase referred to the net cost genuinely borne by the landlord for the insurance cover. Where a commission refund had been received, it reduced the actual cost to the landlord, and accordingly, the amount recoverable as insurance rent. Lord Justice Somers (sitting in the Chancery Division) noted that the landlord’s construction would allow it to profit from a cost recovery mechanism, in conflict with the generally accepted principle that service charges and similar recoverables must not be used to derive profit unless clearly permitted by the lease.
Moreover, the Court accepted the tenant’s restitution claim, ruling that the landlord had been unjustly enriched by retaining commissions while still demanding the gross premiums from tenants. The landlord was ordered to repay the overcharged insurance rent.
- Market Implications
This ruling is likely to have far-reaching implications for the commercial property market. Insurance commissions have long been a source of quiet profit for landlords. Many landlords secure buildings insurance through brokers on terms that return significant commissions, and few leases explicitly address whether these should be passed back to tenants.
The High Court’s decision sends a clear message: unless a lease specifically permits a landlord to retain insurance commissions, they cannot be included in recoverable insurance rent. The ruling reinforces the need for transparency and fairness in how insurance costs are passed on.
This decision may also open the door to wider legal challenges. Tenants across the UK are now likely to scrutinise historic insurance charges, and collective or class action lawsuits could follow. Industry estimates suggest that commercial landlords may face claims for the return of hundreds of millions of pounds in previously undisclosed insurance commissions.
- Practical Steps for Commercial Landlords
Landlords should now carefully audit their current insurance arrangements and lease terms. Key questions include:
- Does the lease clearly define what is recoverable as insurance rent?
- Are any commissions or rebates received from brokers being disclosed and accounted for transparently?
- Are tenants being charged based on the gross premium or the net cost after commission?
Landlords must ensure they are not inadvertently breaching their leases by charging for costs they have not truly incurred. Moving forward, commercial landlords should consider amending lease drafting to include explicit provisions allowing for the recovery of gross premiums, including commissions, if that is their intent. However, such provisions must be transparent and agreed upon with tenants at the outset.
This case also serves as a timely reminder that insurance rent must be used solely as a means of cost recovery, not profit generation. If landlords wish to derive benefit from insurance arrangements, this must be clearly disclosed and contractually agreed upon. The days of quietly profiting from opaque commission arrangements may well be numbered.
Source link