Insurance rent: what's in a premium?

The case of London Trocadero (2015) LLP v Picturehouse Cinemas Ltd and others [2025] EWHC 1247 (Ch), handed down Friday 23 May 2025, provides important guidance on how insurance rent can be charged under commercial leases.

Background

The case concerned a long-running dispute between the landlord of the Trocadero Centre in London and its cinema tenant, Picturehouse.

The landlord was responsible for arranging insurance for the entire Centre and recovering the cost from tenants through insurance rent. As is not uncommon, the landlord had arranged insurance for the Centre through a block policy covering a large property portfolio. Insurance premiums were apportioned to individual properties and then further apportioned to individual units within those properties, under the relevant provisions in the leases.

The tenant challenged the inclusion of broker commissions – up to 57% in some years – in the insurance rent, arguing that these commissions were not recoverable under the lease.

Whilst it had paid all the insurance rent demanded, under protest, Picturehouse challenged the amounts charged, alleging that the landlord had included undisclosed commissions and fees – which artificially inflated the insurance rent.

Decision

1. The Premium Issue

The lease entitled the landlord to charge insurance rent calculated by reference to the amount of “premium payable by [the landlord’] for keeping the Centre insured”. The tenant argued that the landlord was not entitled to recover insurance rent that included commission rebated to it by brokers (referred to as 'Landlord’s Commission').

The court agreed that such sums were not 'payable by way of premium for keeping the Centre insured' under the lease. The judge emphasised that only sums actually payable for for keeping the Centre insured against the Insured Risks (as defined in the lease) could be recovered, not amounts that included rebates engineered by the landlord’s agent.

Mr Justice Richards noted that “Even if Landlord’s Commission does form part of a premium, it is rebated as part of arrangements that the Landlord itself, through its agent CCL, engineered.”

2. The Administration Fee

In 2022/23, rather than charging Landlord’s Commission, the landlord replaced commission with a 35% “placement, administration and work transfer fee.”

The court found this fee was not a genuine insurance cost and was not recoverable under the lease. It was applied before the insurer received the premium and only to recoverable units, raising concerns about its proportionality and justification.

3. The Fire Safety Issues

The landlord was found to be in breach of its obligation to maintain the Centre’s sprinkler system between 2015 and 2020, due to works converting part of the Centre into a hotel. This breach led to increased insurance premiums in the years 2017/18 to 2020/21 relating to fire safety, which the tenant successfully claimed it should not be liable for.

However, the court rejected the tenant’s broader argument that it should not pay insurance rent where the policy included large excesses or co-insurance clauses (which the tenant claimed were because of the landlord’s poor fire safety control). The court held that the landlord had still obtained cover for the 'full cost of reinstatement' as required.

4. Restitution

The tenant’s claim was framed in the law of restitution – it sought repayment on the grounds of unjust enrichment (i.e. that the landlord was not contractually entitled to the payments), characterising the payments made as “overpayments”.

The court found that there was a total failure of basis in relation to the payment of the amount corresponding to Landlord’s Commission, meaning that the tenant successfully recovered overpaid insurance rent, and the 35% fee.

Implications

It is worth remembering that claims based on contract are always fact-sensitive. In this case, the lease specifically only permitted the landlord to claim sums payable, rather than actually paid. On a case-by-case basis, leases may also govern how any overpayment or alleged repayment is dealt with.

The judgment reinforces the importance of transparency in how insurance rent is calculated and the limits on what can be recovered. It also highlights the need for the parties to fully understand insurance arrangements and understand the basis on which charges are levied.

Kirsty Black, Partner and Co-Head of Corporate Occupier Group at Shoosmiths, comments: “This case serves as a timely reminder for occupiers to check their lease terms to ensure that the premiums charged in relation to insurance align with those terms - particularly in light of the limitation period of six years which may affect any potential claims.

“Most landlords will have acted appropriately and transparently with no intention of profiting from the insurance provisions in leases. However, where questions do arise, requesting a breakdown of the premium and any associated commission may help tenants better understand how premiums have been calculated.  We would hope most landlords would engage constructively in providing this information, as a clear and open exchange of information can help both parties resolve issues constructively and avoid the kind of litigation seen in this case.”