Tenants are not contractually liable for “landlord commissions” comprised in premiums payable as insurance rent under the terms of commercial leases.
In a decision which will have far-reaching effects, the High Court has determined this principle in London Trocadero (2015) LLP v Picturehouse Cinemas [2025] EWHC 1247 (Ch).
The claimant, part of the Criterion Group, acquired the freehold interest in the Trocadero Centre in London, a mixed-use property of 588,000 sq ft in 2015. Picturehouse was the leasehold proprietor of the cinema within the centre which at 62,000 sq ft formed a significant part of it, under a lease dated 20 June 1994 which was extended in September 2014. The second and third defendants had interests prior to Picturehouse under the 1994 lease.
The case concerned the recoverability of insurance rent. The tenant was obliged to pay insurance rent by reference to the amount of the “premium payable by the landlord for keeping the centre insured”. Picturehouse claimed it had been overcharged for all years from 2015/16 to 2022/23.
The landlord engaged brokers to negotiate and secure a single block policy covering all properties in the Criterion Group portfolio valued at more than £4bn. The aggregate premium was then apportioned between the various properties and then between the various units in the properties concerned.
The brokers were entitled to commission for their services and free to share their commission with others, including the landlord. The premium charged for property owners’ insurance at the centre represented (i) an amount to fund anticipated claims; (ii) an amount to pay expenses associated with the insurer’s business and (iii) a sum to cover commissions the insurer must pay.
From 2015/16 to 2021/22, the opportunity to obtain landlord’s commission was a driver of the Criterion Group’s earnings and profits. The landlord indicated the level of commission it wanted, which was then reflected in the commission insurers paid to brokers – which sum would be repaid to the landlord – and the premium chargeable increased accordingly. For 2015/16 to 2019/20 the market norm for landlord commissions was 28.75% of the gross premium with 5% for broker’s commission. The landlord’s commission for those years ranged from 44.7% to 57.4%.
While the pricing of the premium was arm’s length, the landlord commission arrangement was a benefit conferred on the Criterion Group by insurers at the expense of the tenants. The rebated landlord commission was not part of the “premium payable for keeping the centre insured” and so was not contractually due under the leases. The tenant was entitled to restitution of the overpaid sums.
Louise Clark is a property law consultant
