Background
In May 2025, Mr Justice Richards delivered judgment in the second round of dispute between London Trocadero (2015) LLP, landlord of the Trocadero Centre in London, and Picturehouse Cinemas Ltd, its cinema tenant. The issue in question: Was the landlord entitled to charge the tenant the insurance premium which included the commission for the landlord and the landlord's broker. Initially, Trocadero successfully obtained summary judgment for circa £2.9 million in unpaid rent and service charges, commenced during the COVID‑19 pandemic. However, Picturehouse counterclaimed over the inclusion of landlord commissions and other fees charged as insurance rent under the lease.
Lease
The lease contained a covenant for the tenant to pay insurance rent "equivalent to the amount from time to time assessed by the [landlord's] insurers as being payable by the landlord by way of premium for keeping the Centre insured". In practice, Picturehouse was billed for a gross premium made up of:
- a net premium, the actual insurance cost,
- a broker's commission, and
- a separate landlord's commission, the sum, in addition to the broker's commission, that the broker and landlord agreed between themselves would be added as commission, charged to the insurer, passed on to the tenant, and ultimately kept by the landlord.
The tenant accepted liability for both the net premium and the broker's commission. However, it contended that the landlord's commission could not properly be treated as part of the sum "payable... by way of premium for keeping the Centre insured" and was therefore not recoverable from the tenant as insurance rent under the lease.
Decision
Mr Justice Richards, agreeing with the tenant, ruled that:
The insurance rent was limited to the genuine cost of keeping the Centre insured—namely, the net premium and broker's commission. The landlord's commission did not qualify as this was a self‑created charge, unrelated to actual insurance costs, and amounted to an unjustified profit at the tenant's expense. The tenant was therefore entitled to restitution recovering approximately £700,000 of overpaid sums spanning several years.
Trocadero has indicated an intention to appeal the decision.
Significance
Landlords commonly include undisclosed commissions in insurance rent as a method to profit. The ruling challenges this practice and the commercial insurance market, with commentators warning of potential waves of restitution claims from tenants. Some landlord commissions in this case reached 60% of premiums. The judgment underscores the importance of precise lease drafting and the impact of implied terms, even where contracts appear comprehensive especially on insurance rent provisions.
Takeaways
For Landlords
- Clear drafting is essential: if recovery of landlord's commission or additional fees is intended, leases must explicitly authorise it. The court will interpret the wording of the lease strictly. Unless the lease expressly allows a landlord to charge its own commission or fees for arranging insurance, tenants are unlikely to be liable for such payments.
- Courts are reluctant to imply terms in favour of landlords. Commercial leases are expected to set out obligations clearly, and landlords cannot rely on industry practice or custom to justify commissions. The lease language remains decisive.
- Limit retrospective exposure: consider lease amendment and remediation before restitutive claims arise, bearing in mind six-year limitation periods and potential concealment exceptions
For Tenants
- Tenants who know, or reasonably should know, that landlords are charging unlawful commissions should act promptly to recover those sums, as delay could prejudice their position. While standard claims are subject to a six-year limitation, claims based on mistake or concealment may extend the limitation period.
- The ruling emphasises the need for careful review of insurance rent clauses, only amounts genuinely "payable by the landlord... for keeping the property insured" are likely to be recoverable.
- Seek disclosure: obtain insurance invoices, commission breakdowns, and evidence of net premiums versus broker and landlord commissions.
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.
