It has been the practice for many commercial landlords, when arranging block insurance, to be paid commission by insurers, but without tenants necessarily knowing about it. Alternatively, the landlord might take a share of a broker’s commission.
An important ruling has placed this often opaque practice firmly into focus, allowing a tenant a refund of insurance overpayments. The landlord had effectively engineered excessive commission at the tenant’s expense.
Business landlords should note that further legal challenges can be expected; and tenants who suspect they have been overcharged should seek legal advice about a potential claim for refunds following historic service charges.
What's the background?
In London Trocadero (2015) LLP v Picturehouse Cinemas Ltd and others [2025] EWHC 1247, the judge observed: “People in a business relationship governed by a contract… expect to pay and receive only sums that the contract requires.”
In this case, the tenant paid what was contractually due - and additional sums which it was not contractually liable for.
Picturehouse Cinemas was the tenant of the large Trocadero Centre in London where it operated a large cinema. Under the two relevant leases, the landlord was required to obtain insurance for the whole of the Trocadero Centre and entitled to recover the cost of it from all its tenants.
The tenant argued that it had been overcharged insurance through its service charges for the years 2015-2016 through 2022-2023. At the time, it did not have any concerns that the amounts demanded were excessive.
In the relevant insurance years, the insurance premium charged by insurers at the Trocadero Centre included the brokers’ commission. But in some cases, the landlord’s commission was inflated by taking a share of commission payable on policies at a rate of as much as 56% of the premium. The tenant claimed a repayment.
The landlord’s argument that it was well understood that a ‘premium’ payable for an insurance policy included commission was rejected. The judge said “a typical landlord and a typical tenant” would expect ‘premium’ to include parts used to fund commissions paid to brokers, but not to the extent that a broker chose to share its commission with another.
Therefore, certain of the amounts paid by the tenant over the years, in excess of the insurance rent, had not been contractually due. The landlord had been unjustly enriched at the expense of the tenant.
The judge noted that it was consistent with common sense that the landlord could not retain sums that were not due. It was also at odds with commercial reality: people pay invoices because they consider them to request payments of lawfully due sums.
The tenant was thus entitled to a total repayment over the years of around £700,000.
What does this mean for me?
The ruling is a big win for commercial tenants whose legal rights are gradually being strengthened in various ways. It could also lead to similar claims by tenants who believe they may have been overcharged insurance premiums as a result of a similar lack of transparency on the part of their landlord.
Landlords should be reviewing and altering their practices in view of the case and, if necessary, plan for potential similar claims by tenants.
Get in touch
The property litigation team at mfg Solicitors are experienced in advising and representing businesses on their property disputes. For specialist advice, get in touch with Harjie Singh Bindra by emailing harjie.bindra@mfgsolicitors.com or calling on 01527 831691.
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