A day of reckoning for landlord's hidden costs
Landlords can no longer slip inflated commissions into insurance rent without specific provision in the lease allowing them to do so.
The recent High Court judgment in London Trocadero (2015) LLP v Picturehouse Cinemas Ltd & Ors [2025] EWHC 1247 (Ch) is a wake-up call for both landlords and tenants. It establishes that insurance rent must reflect genuine costs incurred, not windfalls from commission-loaded premiums. Understanding the implications of this case is crucial to ensuring fair commercial lease arrangements going forward.
Case overview
There were a number of issues in dispute between the landlord and tenant, the most significant issue being the landlord's ability to recover commission as part of the insurance rent, from the cinema tenant. The tenant paid the insurance rent under protest and then challenged the inflated premiums, some of which included more than 50% of landlord's commission. The tenant claimed that, on a proper construction of the lease, the insurance rent provision did not specifically entitle the landlord to recover commission. The provision only entitled the landlord to recover the 'premium payable by the landlord for keeping the Centre insured'.
Outcome
Judgment was handed down on 23 May 2025 and the High Court concluded that commissions which did not represent genuine third-party costs could not be charged to the tenant. These were not legitimate parts of the 'premium payable' and were therefore, outside the scope of the lease's insurance rent provisions.
Whilst the leases in question were entered into in 1994 and 2014 and the decision does turn on the specific drafting of those leases, it does highlight the need to check individual lease terms, particularly in relation to what is and is not included within the definition of insurance rent.
Action to take
Tenants - if you have been paying insurance rent under your lease, now is the time to review your lease terms and investigate previous insurance rent payments, to establish whether the premiums included undisclosed or excessive commissions. The precedent set by this case means that you may be able to recover those 'overpayments' but it is important to act now - recovery may be subject to a limitation period.
Landlords - a reminder that transparency is essential when recovering costs from tenants. If your leases are unclear as to what is recoverable, or if you have accepted commission payments, you may face legal exposure. Now is the time to review your lease terms and insurance procurement practices to establish the extent of any potential liability.