A recent case between the landlords and tenants of the Trocadero Centre in London will likely lead to tenants bringing more claims against their landlords of the issue of “insurance rent,” according to property litigation lawyer Chris Perrin.
Last week a High Court judge ruled that landlords Criterion Group had charged tenant Picturehouse Central a commission on buildings insurance that was “outside the norm”. Picturehouse Central is the flagship central London cinema in the Cineworld-owned Picturehouse chain. Picturehouse was claiming back unspecified amounts from Criterion, arguing it overpaid a decade of so-called “insurance rent”, a charge levied on a leaseholder by a freeholder to contribute towards insuring the building.
When the case went to trial in March, Picturehouse’s lawyer, Jonathan Seitler KC, said Criterion Group arranged for its insurers to charge enhanced commission on insurance which Criterion passed on to leaseholders and “pocketed as profit”. This, Seitler said, wasn’t justified and should be paid back. In his ruling last week trial judge Mr Justice Richards agreed that the commission was “outside the norm,” and said money should be repaid. The judge didn’t specify how much.
Speaking outside of court on the first day of the hearing Picturehouse lawyer Seitler said that the case “could affect every commercial property in the country.” Now that the ruling has been handed down, it seems likely that commercial tenants across the country will be checking the terms of their leases, and some of them will likely file claims, according to Perrin, a real estate disputes parter at Addleshaw Goddard in Manchester.
“The decision in this case doesn’t automatically mean that every tenant has a claim against their landlord,” he said. “But I would expect landlords and tenants to scrutinise the decision and their documentation to see if there is a commission and what level it’s charged at,” he said.
While it is well known that some landlords charge a commission on insurance rent, the “grey area” that this case looked at was the appropriate level, he said, adding that claims are likely to come sooner rather than later as this type of litigation is time sensitive. “As this is a restitutionary claim, limitation will start to erode any claim,” he said.
He also said that he expected the landlords to attempt to overturn the ruling at Appeal. Even so, given the time-sensitivity, that’s unlikely that claimants will wait for another trial and judgement before bringing a case.
