ARTICLE
3 July 2025

Corporate Occupiers May Be Over-paying "Insurance Rent And Could Be Entitled To A Refund

LS
Lewis Silkin

Contributor

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The corporate occupier world has been shaken up by the recent "Trocadero" decision in which the High Court ordered landlord, Criterion Group, to repay over £700k of wrongly charged...
United Kingdom Real Estate and Construction

The corporate occupier world has been shaken up by the recent "Trocadero" decision in which the High Court ordered landlord, Criterion Group, to repay over £700k of wrongly charged "insurance rent" to its tenant, Picturehouse.

The case could have substantial implications for tenants and landlords across all sectors. In theory, tenants could be owed substantial sums.

The Court found that Criterion had (across its £4 billion property portfolio) been structuring buildings insurance premiums with insurers and brokers so that Criterion would receive a "landlord's commission" which Criterion would then pass onto its tenants. This commission (which could be up to 60% in some cases) was in addition to the broker's commission and was not in return for any services provided by Criterion. In fact, it was entirely at Criterion's discretion and the same cover could have been procured without payment of the commission.

The Court found that Criterion was not entitled to charge the "landlord's commission" to Picturehouse (a tenant at London's landmark site, the Trocadero) as the commission did not fall within the lease definition of "insurance rent" as it was not a true cost of cover for the buildings. The tenant should only be liable for the net premium (excluding the commission element) notwithstanding that Criterion strictly paid a gross premium (including the commission).

You might think that the decision is obviously correct and that the landlord's approach was clearly wrong. In fact the position is not so simple and Criterion is said to be appealing the decision. The complexities arise for a range of reasons:

  • It has been an established market practice for many years for landlords to include 'commissions' as part of 'insurance rent' payable by tenants. From the Trocadero case, it appears that this practice dates back to at least the 1990s – albeit that the detail and true nature of these commissions (e.g., differentiating between say a 'landlord's commission' and a broker's commission) has not been widely understood;
  • There are different types of "landlord's commission" and all are not equal. Some may relate to situations where the landlord takes on a service which the insurer would otherwise perform and which would (at least in theory) be covered by part of the 'true' premium. These have been held as recoverable from tenants – see Williams v Southwark LBC (2001). Other commissions may on careful analysis be properly characterised as discounts relating to bulk insurance and/or loyalty bonuses. These have been found to be irrecoverable – see Williams v Southwark LBC (2001). In one recent case, Octagon v Cantlay 2024, a commission was found to be in return for a service by the managing agents and the Court found that this was very clearly recoverable under the lease and the tenant was liable to pay the gross insurance premium (including the commission). This was notwithstanding that the commission was on top of and substantially in excess of the managing agent's standard management fee; and
  • Seeking repayment of sums paid under a mistake of fact/law is not straightforward as the claim is in "restitution" and such claims can be lost over time or settled inadvertently.

So, whilst the Trocadero case may seem clear cut, it will be intriguing to see if the appeal proceeds and what the outcome is.

In the meantime, the advice to tenants must be to investigate whether their 'insurance rent' includes an element of "landlord's commission" and, if it does, to get advice on whether that can be challenged.

There are some lawyerly words of caution required here to manage expectations as pursuing this issue will not be straightforward as:

  • Landlords are notoriously reluctant to disclose information about insurance commissions. If this is not provided voluntarily, the only way to get it would likely be an action for pre-claim disclosure – which is neither simple nor inexpensive;
  • If information is provided, it may be hard to assess if the insurance demanded/paid has included unjustified commissions. This would likely require input from an insurance expert;
  • Even if you have been paying for unjustified commissions, it does not automatically follow that you can get this back. The first question in all cases will be to ask what the lease says and to construe the wording carefully to see what can be recovered as part of the insurance rent. In this aspect, the Trocadero case was unusual as the lease was quite old. By contrast, modern leases commonly include an express term that landlords can retain all commissions – see for example, the Model Commercial lease. Secondly, it will be necessary to investigate whether any right to reimbursement has been lost (e.g., by passage of time or agreement).

That note of caution aside, it is surely likely that CFOs, GCs and property managers at well-advised tenants will now be looking into this issue.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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