Commercial landlords are now on high alert following a recent high court ruling
It has been common practice for many years for landlords to take commission payments from insurers, or share brokers’ commissions, when arranging block insurance policies for their portfolios.
Commercial property insurance is invariably arranged by the landlords of commercial buildings and then charged to the tenants through annual service charges.
However, a recent high court ruling now throws the practice of taking a commission from insurers – this being hidden from their tenants - into doubt and may even give tenants the right to reclaim past commissions enjoyed by their landlords.
The case in point was a decision made in Trocadero (2015) LLP v Picturehouse Cinemas Limited [2025]. In this case of Picturehouse Cinemas, which is part of the debt loaded Cineworld group*, in a recent court battle ended with a judgement in favour of the tenant over so-called “insurance rent".
The case revolved around the company’s flagship London cinema, the 62,000-square-foot Picturehouse Central, in the 588,000-square-foot Trocadero Centre which is leased from Criterion Group.
According to Head of Commercial Property at law firm Harper James, Parmjit Gill, says the recent ruling High Court ruling in favour of cinema chain Picturehouse has sent shockwaves through the UK’s commercial property sector and warns landlords against hiding insurance commissions. The case pushes for more transparency in commercial leases, and Gill says.
“The recent High Court ruling involving the Trocadero Centre and its tenant, Picturehouse, found that landlords receiving large insurance commissions - sometimes up to 60% of the premium - were potentially overcharging tenants, who believed they were simply covering the cost of insuring the building. The judgment makes it clear that such commissions, which were not properly disclosed or justified, could be challenged and reclaimed.
“This is a landmark decision that landlords can’t afford to ignore. Many landlords bundle insurance premiums into service charges, often relying on managing agents or brokers. If these premiums include hefty commissions that aren’t transparently disclosed, they could now face repayment claims from their tenants.
“For tenants, particularly businesses still grappling with tight margins, this ruling offers a new avenue to challenge historic service charge demands and push for more transparency in lease negotiations.
“The key takeaway is this: both landlords and tenants need to revisit the terms of their leases and ensure insurance arrangements are not only fair but fully disclosed. This decision marks a shift toward greater accountability, and small business landlords who get ahead of it will be in a much stronger position moving forward.”
The court decided that landlords can't pass on insurance commissions from brokers as part of what tenants pay. In this case, it meant the landlord had to repay over £700,000.
The Picturehouse case may have been influenced by recent legislation brought in by The Leasehold and Freehold Reform Act 2024. This act brought in a range of measures to give more powers and protections for homeowners and leaseholders.
It established powers to rebalance the legal costs regime for leaseholders and remove barriers that may deter leaseholders from challenging their landlord. It also introduced powers to enhance the transparency of service charges, allowing leaseholders to better scrutinise and challenge unfair costs. These powers may yet require secondary legislation to give full power to the act.
The act also created powers to address long standing concerns that some leaseholders are being charged for the arranging and managing of insurance by their landlords, freeholders or property managing agents when they cannot properly justify and fully account for the work undertaken.
A recent consultation into the affair stated:
“The concern for our governments is that these leaseholders are being charged significant insurance costs whilst having little influence or ability to scrutinise these costs, or to challenge those costs if they are unreasonable. This could include disproportionate remuneration for services in the arranging and managing of insurance, or even commissions – and other financial benefits – being given to landlords, freeholders or property managing agents that are unconnected to the services provided.”
This consultation was held by the Ministry of Housing, Communities and Local Government and the Welsh Government and ran for 12 weeks from 2 December 2024 to 24 February 2025. It looks to put forward proposals to address the issues. Its stated objective is to ensure that “any costs in relation to the management and arranging of insurance charged to leaseholders by landlords, freeholders or property managing agents are fair and transparent.”
The Leasehold and Freehold Reform Act 2024 allows for the replacement of the current practice of paying landlords, freeholders and property managing agents for arranging and managing insurance, which now is commonly done through an insurance broker sharing a proportion of their commission.
The Leasehold and Freehold Reform Act 2024 instead allows for a new permitted fee that landlords, freeholders and property managing agents would charge leaseholders separately from the insurance premium. “This fee would be fair, transparent and reflective of the work contributed. We want to understand with the help of responses to this consultation what payments will be permitted within this fee so as to inform secondary legislation.”
Landlords and tenants will be closely scrutinising the Picturehouse High Court ruling, which was in favour of the tenant on the payment of commercial property insurance premiums.
The ruling found that tenants of commercial premises within larger portfolios could have been overcharged their insurance liability by as much as 60% by some landlords. Picturehouse has said it wants “unspecified amounts” paid back to it by its landlord Criterion.
It’s not in question that a landlord is obliged to obtain insurance for the whole of its property portfolio and is entitled to recover the cost of doing so from its tenants. The case revolved around a dispute about the tenant's liability to pay what is termed “insurance rent”, the commission amount the landlord receives.
The case had a wider context in that it formed part of a wider dispute involving a claim by the landlord for recovery of rent arrears, including insurance rent, and other sums accrued during the covid pandemic. The insurance rent was part of a counterclaim to the proceedings brought by the landlord Criterion Capital.
Justice Richards ruled that the landlord had ultimately inflated insurance premiums by the commission amounts, resulting in the tenant paying over £700,000. But the ruling has opened up a casumm, exposing the widespread practice that may mean other tenants are not entitled to reclaim similar overpayments from their landlords.
The Picturehouse barrister Benjamin Faulkner, for Wilberforce Chambers, has commented on Linkedin that the ruling means tenants of commercial premises forming part of a large building or portfolio could have been overcharged insurance rent by as much as 60% over a period of years.
Other real estate legal specialists have commented that this judgment, though possibly subject to an appeal, has the potential to have far-reaching consequences for landlords, potentially opening the floodgates to numerous claims.
London Trocadero (2015) LLP issued this statement:
“Whilst we respect the decision of the Learned Judge, we disagree with it. Indeed, no doubt many in the industry will be surprised to learn that a 'premium' for keeping a property insured does not include any portion of brokerage which is legitimately shared by insurance brokers with their landlord clients. We will be seeking permission to appeal the decision.”
There is a general trend in recent legislation to attempt to “level-the playing-field” between landlord and tenant, stressing the importance of fairness and transparency. Landlords would be well advised to review their practices in view of this ruling, regardless of the result of any appeal.
*Cineworld faced a severe debt crisis after expanding rapidly into the US and Canada before and during the Covid pandemic. The impact of covid, movie streaming and the filmmakers' strike resulted in the company entering bankruptcy protection and delisting from the London Stock Exchange. Cineworld subsequently restructured its debt, leading to a Chapter 11 filing in the US and administration in the UK. Its debt was restructured through a deal with its lenders which allowed the company to release billions in debt and structure a rights offering, while also providing new debt financing.
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