Landlord commissions: Could tenants have overpaid for insurance on a commercial lease?

In a recent decision, London Trocadero (2015) LLP v Picturehouse Cinemas Limited [2025] EWHC 1247 (Ch), the High Court considered the “common practice” of commercial landlords increasing their income by adding additional fees to insurance premiums that they charged their tenants, also known as a “landlord’s commission”.

The fees would be added as part of the insurance premium (via a commission sharing arrangement with the insurance broker), so tenants were not necessarily aware that their premiums were increased by these extra landlords’ fees.  The Court decided that the terms of the lease in this case (which appeared to be on standard terms) did not permit the landlord to include these charges when recouping insurance premiums from tenants. The judgment is of interest to all tenants of commercial properties who have been required to meet the cost of buildings insurance under the terms of their lease.

Background

The tenant rented a unit of the landlord’s commercial property portfolio. Under the terms of the lease, the landlord was required to obtain insurance for the whole property and was entitled to recover the cost of doing so from the various tenants of the centre, by way of “insurance rent”. The insurance rent was paid annually and calculated by reference to the amount of "premium payable by [the Landlord] for keeping the Centre insured".

The tenant claimed, among other things, that the landlord was not entitled to charge its own fees as part of the “insurance rent”.  The landlord’s fees, also called the “landlord’s commission” arise as a result of a common practice by landlords and brokers to increase the landlord’s income. When arranging the insurance, the landlord instructs insurance brokers to obtain a suitable policy with an insurer. The insurer pays the broker a commission for its services and then adds this commission to the price of the insurance premium. Separately, the broker agrees with the landlord to share the commission that it received from the insurer. Commissions are calculated as a percentage of the premium. The Court heard evidence that commissions between 50-60% were not unusual and could be as high as 100% (i.e. the same as the price of premium, effectively doubling the cost to tenants).

In this case, the landlord passed on the cost of the premium to the tenants of its properties plus insurance premium tax, calculated on the whole premium (including the commission).

One year the landlord charged a 35% fee in addition to the insurance premium rather than taking a share of the broker’s commission for the cost of its work in arranging the insurance renewal.

Can landlords charge a commission for obtaining building insurance?

The Court considered whether, viewed objectively, the parties to the contract would understand that the term “premium” in the contract would include the landlord’s commission. Both parties agreed that an ordinary landlord and an ordinary tenant would expect a premium to include commission that the insurer must pay. However, the Court concluded that landlords and tenants would typically expect the premium to include the commission paid to brokers; there was no common understanding that landlords would receive a portion of that commission.

Further, the Court found that under the terms of the lease, the landlord could only pass on the premium that was “payable”. As the landlord’s commission was not ultimately paid by the landlord, it could not be charged to the tenant.

The Court found that the landlord was not acting as a broker for the insurer when arranging insurance for its properties, nor were the commissions it received an appropriate economic award for the work that it undertook to arrange insurance each year. It made a similar finding with respect to the 35% fee. The Court considered that it was not unreasonable that the landlord was not reimbursed by way of a commission, as it also charged tenants for other costs it incurred, such as through service fees.

The Court ordered the landlord to repay hundreds of thousands of pounds worth of incorrectly charged commissions to the tenant.

Have you been affected?

Many tenants will have been unaware that commercial landlords were taking commissions on insurance arranged pursuant to their lease. Although this case considered the specific language of the lease, it is likely that many other commercial leases have been drafted in similar terms, which means that it may be possible for commercial tenants to recover landlord’s commissions. If you think that you have been affected, please get in touch with us to discuss your options.