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Insurance rent and the Picturehouse dispute: What the Trocadero case teaches us about transparency in commercial leasing

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Insurance rent and the Picturehouse dispute: What the Trocadero case teaches us about transparency in commercial leasing

In late May 2025, the High Court delivered a decision that has profound implications for the way commercial landlords and tenants handle insurance costs. In London Trocadero (2015) LLP v Picturehouse Cinemas Limited [2025] EWHC 1247 (Ch), Mr Justice Richards determined that landlords cannot simply tack on undisclosed broker commissions to their tenants as part of the insurance rent. Instead, unless a lease expressly permits it, any inflated insurance cost that arises because a landlord pockets commissions must be repaid to the tenant.

This outcome underscores both the legal and practical importance of transparent lease drafting. It also offers a cautionary tale for landlords who have grown accustomed to time‐honoured, but legally questionable, commercial practices.

By examining what insurance rent and commissions are, how the dispute arose, the reasoning adopted by the High Court, and the lessons for the market, investors and stakeholders can better appreciate why lease clarity and open communication about costs are now more critical than ever.

What are insurance rent and broker commissions?

Under most commercial leases, landlords assume responsibility for procuring insurance for the entire building or estate and then recharge their tenants in proportion to each occupier’s floor area or agreed proportion. The amount charged to tenants for this purpose is conventionally referred to as “insurance rent.” It represents the premium the landlord pays to ensure that, in the event of damage or other insured peril, the building can be reinstated or losses can be covered. In a straightforward world, insurance rent equals precisely what the insurer charges – no more, no less.

However, over time a parallel practice developed: instead of simply paying the insurer’s quoted premium and passing that figure on to tenants, many landlords began instructing their insurance brokers to negotiate a commission payable to the broker, often in the form of a percentage of the premium. That broker, in turn, would remit the commission to the landlord as extra income. Since insurers typically build broker commissions into the overall premium, this arrangement leaves the landlord’s insurer collecting exactly the same net premium, while the broker still receives its commission. But the tenant, unaware of the commission already embedded in the insurer’s figure, ends up covering the landlord’s additional earnings. In effect, tenants subsidise a profit stream for landlords that is extraneous to the actual cost of insuring the property.

Between them, insurers, brokers, landlords, and tenants would each receive or pay exactly what they would have under a straightforward insurance arrangement. The insurer receives its net premium; the broker receives its usual commission; but the tenant ends up paying more for no additional insurance benefit. Put simply, the landlord pockets a windfall at the tenant’s expense, all under the guise of legitimate insurance rent.

Lease provisions and the genesis of the dispute

Picturehouse Cinemas occupied prime London real estate at the Trocadero Centre under two leases: one executed in 1994 and another in 2014. These leases contained the standard provisions for tenant contributions towards insurance. They stated that the landlord would procure comprehensive insurance cover for the property and Picturehouse would

reimburse its share based on its proportionate floor area. Nowhere in these leases did it explicitly allow the landlord to levy extra charges beyond the actual cost of insurance.

Over several years, Criterion Group, which controlled the Trocadero Centre, regularly instructed its insurers to pay inflated broker commissions. Those commissions, on several occasions, reached as high as sixty per cent of the headline premium. Even though the insurer received the net premium it would have expected under a commission‐free arrangement, Criterion’s insurance brokers remitted to Criterion the commission portion, effectively padding Criterion’s bottom line. On paper, then, the tenants were told to reimburse “insurance rent” equal to the insurer’s gross premium (net premium plus broker commission), while Criterion retained the commission for itself.

Although such a practice had been common in certain corners of the commercial property sector, it remained opaque to tenants like Picturehouse. The costs of those additional commissions continued to be concealed beneath the normal rubric of “insurance rent,” and Picturehouse had no inkling that a sizable slice of its payments was feeding into Criterion’s coffers instead of covering genuine insurance costs.

How the dispute came to court

By 2025, Picturehouse Cinemas began to suspect that something was amiss. Over the years, the cinema had not only paid its rent and outgoings diligently, but it had also kept its eye on market movements in insurance premiums. Eventually, Picturehouse discovered that the very same insurance policy structuring, had it been negotiated through a broker on a purely transparent basis, would have charged significantly less than what Criterion was billing them. In fact, by the court’s own findings, Criterion had been pocketing a very large sum a year from this commission‐skimming scheme.

Picturehouse formally challenged the practice by initiating proceedings. Its argument was twofold: first, that under the explicit wording of the leases, “insurance rent” meant the premium actually paid to the insurer, and did not encompass any embedded commissions; and second, that Criterion’s insistence on including those commissions in the reimbursement figure amounted to an unlawful overcharge by way of unjust enrichment. As a result, Picturehouse sought repayment of every penny of “overpaid” insurance rent since the start of its tenancy.

The High Court’s analysis and decision

When the matter reached Mr Justice Richards, he began by examining the relevant clauses in the lease. Those clauses required Picturehouse to pay its share of the “premium” demanded by the landlord’s insurers. But the leases did not supply an elaborate definition of “premium” beyond that basic wording. In contracts of this nature, where a term is left undefined, courts look to the ordinary meaning of the word in context. Here, the “premium” naturally referred to the actual price that the insurer charged for providing cover. It did not include any additional sums that ended up in the landlord’s pocket via the broker.

Having nailed down that point, the court turned to the mechanics of the commission arrangement. It concluded that, effectively, Criterion was demanding Picturehouse reimburse a figure greater than the true insurance cost by an amount equal to the broker’s commission. In doing so, Criterion treated that commission as though it formed part of the lease‐permitted “premium.” As no express provision in the lease authorised Criterion to retain any commission from the insurer, the landlord was simply not entitled to recover it from the tenant.

Having resolved that legal foundation, Mr Justice Richards held that Picturehouse was entitled to restitution for the sums it had overpaid. In his words, “Criterion has been unjustly enriched by the retention of broker commissions which should have been borne by the landlord and not by the tenant.”, Picturehouse’s restitutionary claim succeeded, and the judgment required Criterion to repay all unlawfully charged commission‐laden amounts – which added up to several hundreds of thousands of pounds.

Why this decision matters for landlords

This judgment punctures a long‐standing practice in which some landlords have quietly slid broker commissions into the insurance rent figure without explicit contractual permission. For those accustomed to treating insurance commissions as a hidden revenue stream, the ruling is a blunt reminder that the starting point of every lease is the text itself, and if the lease does not clearly authorise the landlord to retain commissions, no amount of entrenched industry custom will save that practice.

From now on, commercial landlords must take deliberate steps when drafting or renewing leases. If they wish to preserve the right to retain a broker commission, the lease must state so in express and unmistakable terms. That might involve defining “premium” to include “any broker commission payable by the landlord,” or carving out a separate subclause that specifies how commissions are to be handled – perhaps earmarking a fixed percentage or capping the amount. Unless those permissions appear front and centre in the lease, any attempt to pass commissions onto tenants will likely be struck down.

Moreover, even where a lease seems to permit wider cost recovery, prudent landlords will now feel compelled to disclose explicitly to tenants how insurance costs are calculated, who receives what, and why particular commissions are necessary. If a landlord fails to proffer a transparent explanation, a court may conclude that the surrounding circumstances give rise to an implied term barring hidden markups, particularly where a standard form of “premium” is intended to refer only to the actual insured sum.

Guidance for tenants and occupiers

For tenants, the practical takeaway is equally stark: do not assume that “insurance rent” automatically includes every expense your landlord claims. Whenever a landlord demands reimbursement of insurance costs, tenants should ask for copies of the policy schedule and broker invoices. A careful review (or a surveyor’s report) can reveal whether the landlord is recovering broker commissions that should have remained with the broker. In the absence of a lease clause allowing a commission to be passed on, a tenant may well have a restitutionary claim, and will be entitled to all overpaid sums dating back to the start of the lease or any reasonable limitation period.

More broadly, tenants and their advisors should familiarise themselves with the lease recovery provisions. If a lease states that insurance rent comprises “the premium actually paid by the landlord to the insurer,” there is no room for “promoted commissions” or uplifted broker fees. Before agreeing to any lease renewal or negotiating a surrender, tenants would do well to insert a provision requiring landlords to certify on demand that “insurance rent” does not include any sums that are not strictly payable to the insurer.

Implications for investors and the commercial market

Commercial property investors, lenders, and other stakeholders often consider a landlord’s portfolio to be a hive of stable cash flows – fees, rents, service charges, and other ancillary incomes, including insurance commissions. Yet the High Court’s decision draws a clear line between permissible cost recovery and impermissible profit‐taking. Where market conventions stray from strict legal ownership of costs, there is now a tangible risk that tenants may challenge and claw back large sums. Debt providers, too, should scrutinise lease covenants carefully to gauge whether a landlord might unknowingly expose itself to restitutionary claims in circumstances where it has historically assumed the right to pocket commissions.

As for the market at large, this ruling is likely to set off a ripple effect. We can expect to see a fresh wave of tenant enquiries into long‐running commission‐skimming arrangements. Tenants who have held long leases, particularly those with lengthy tenures, may demand retrospective audits of insurance rent invoices. Where empirical studies or expert reports can quantify the standard broker commission for a given building or risk profile, landlords may find themselves defending claims that hundreds of thousands of pounds.

Lessons learned

The Picturehouse Cinemas case serves as a potent reminder that apparent “industry norms” are no substitute for careful lease drafting. Landlords should revisit any existing leases that allow for broadly stated recovery of insurance costs. If those leases do not expressly contemplate broker commission, it is prudent to anticipate that tenants may challenge commissions as unjust enrichment. From the outset of any landlord‐tenant relationship, including renewals, both parties should ensure that lease definitions reflect the financial reality of how insurance premiums, broker fees, and other ancillary charges will be allocated.

Tenants, in turn, must be proactive in investigating whether their lease truly allows a landlord to recover any sum beyond the insurer’s actual premium. It is no longer safe simply to pay the invoice handed over by the landlord’s property manager or finance department without question. Demanding transparency, insisting on policy schedules, and engaging independent advisors to verify broker fees are essential steps for any savvy tenant wishing to avoid becoming a backstop for a landlord’s extra profit margin.

Above all, this case affirms a broader principle: commercial leases should be viewed as living documents through which each party’s rights and obligations must be clearly understood, meticulously negotiated, and fairly applied. In the opaque arena of insurance procurement, where commissions and premiums can become tangled, a little upfront clarity can save both sides from protracted, and costly, litigation down the road.