A High Court decision that could send ripples across the commercial property and insurance markets has ordered a central London landlord to repay nearly £700,000 in insurance-related commissions charged to its tenant, ruling such payments were not contractually permitted under a standard lease.
The case — London Trocadero (2015) LLP v Picturehouse Cinemas Ltd — examined whether a landlord could recover so-called “insurance commissions” it received from insurers as part of the premium it recharged to tenants. The court found that while the lease obliged the tenant to contribute toward the cost of insuring the building, it did not extend to amounts secretly rebated to the landlord.
In his judgment, Mr Justice Richards held that sums channelled back to the landlord — beyond standard broker commissions — were not legitimately incurred in insuring the premises and could not be recovered through the lease’s insurance rent clause. The landlord, a vehicle of Criterion Capital, had received commissions from insurers over an eight-year period, sometimes exceeding 50% of the total premium.
Critically, the court found that these landlord commissions did not reflect any service provided by the landlord, nor were they necessary for the procurement of insurance. The judge concluded that they were a profit-making device incompatible with the purpose of the insurance obligation in the lease, which was “to keep the Centre insured,” not to generate landlord income.
The tenant, Picturehouse Cinemas — part of the Cineworld group — is now entitled to reclaim the commissions paid over the disputed period, totalling approximately £700,000.
While the ruling does not alter statutory law, it casts a stark light on industry practices long considered routine. In the commercial leasing sector, it is not uncommon for brokers to split their commission with landlord clients, particularly where landlords arrange portfolio insurance for multiple properties.
However, the judgment makes clear that unless leases explicitly authorise such arrangements, tenants should not be expected to fund landlord earnings that do not serve the core purpose of obtaining insurance. In effect, the court has drawn a line between cost recovery and profiteering.
Insurance compliance expert Branko Bjelobaba told The Times that the case may herald a deluge of restitution claims: “Commercial tenants are already under pressure. This ruling gives them ammunition to challenge opaque insurance charges and demand proper disclosure — or repayment.”
A spokesperson for Criterion confirmed it is seeking leave to appeal, stating: “We respectfully disagree with the decision. The industry has long treated commissions shared with landlords as a legitimate element of insurance arrangements.”
However, others believe the writing is on the wall. Parmjit Gill, head of commercial property at Harper James, described the ruling as a “wake-up call” for landlords: “This is a major development. Landlords need to revisit their leases and ensure transparency around insurance charges. The use of commissions to supplement revenue, without disclosure or lease authority, may no longer be tenable.”
Ion Fletcher of the British Property Federation struck a balanced note, advocating for clarity rather than condemnation. “Where landlords negotiate bulk insurance deals that result in cost savings for tenants, there may be a basis for recovering some of the administrative effort involved — but only with full disclosure and within agreed lease frameworks.”
The judgment arrives at a time of mounting pressure for reform. The residential leasehold market has already seen government-led changes in response to similar concerns, culminating in the Leasehold and Freehold Reform Act 2024. No such legislative momentum currently exists in the commercial arena, but this ruling could act as a catalyst.
Legal practitioners now advise both landlords and tenants to examine insurance clauses with greater scrutiny. For landlords, this may mean revising contracts to expressly permit recovery of any commissions or introducing a transparent fee structure. For tenants, the focus will be on reviewing historical charges, requesting documentation, and, where appropriate, pursuing restitution.
This ruling reinforces a fundamental principle: insurance rent must reflect the genuine cost of insurance, not a hidden revenue stream. As the commercial leasing world digests the implications, one thing is clear — the days of quiet commissions may be numbered.
