Leisure Sector Update: Court Ruling on Insurance Rent Charges

Welcome to the Harrison Drury Leisure Sector Newsletter. Your regular update on legal developments across the leisure, hospitality and tourism sector. Our aim is to keep you informed, prepared and ahead of the curve with insights tailored to support you and your business.

A recent High Court decision in the case of London Trocadero (2015) LLP v Picturehouse Cinemas Ltd and others [2025] EWHC 1247 (Ch) has provided a warning on how insurance rent can be charged under commercial leases.

In this case, the landlord had arranged to insure the building under a block policy, and the lease in question (which granted the tenant a demise of part of that building) obligated the tenant to pay a proportionate part of the amount “payable…by way of premium for keeping the Centre insured”.  The landlord had engaged in a practice (which is not uncommon in the marketplace) whereby it asked its insurer to pay the broker an inflated commission, which the broker then passed on to the landlord.  The insurer increased the premium on the insurance, which the landlord then passed as a cost to the tenant.  There was also a “placement, administration and work transfer fee” charged in the year 2022/23 at a rate of 35% of the insurance premium.

The tenant challenged the amounts charged by way of insurance rent, alleging that the undisclosed commission and fees had inflated the insurance rent.

Referred to as the Landlord’s Commission, the Court agreed that the rebated sums engineered by the broker were not recoverable from the tenant.  In addition, the 35% fee was held to not be contractually due.  The tenant was entitled to restitution on the grounds of unjust enrichment and therefore successfully recovered the overpaid insurance rent and the 35% fee.

Whilst this case (like all contract disputes) was decided on the specific facts, it has shone light on a practice that is now likely to see an increased focus (especially from tenants) on both historic and future insurance rent payments.  It has reiterated the need for transparency in how insurance rent is calculated and the limits (pursuant to the terms of the lease) on what can be passed on to the tenant.

If you have any concerns and/or questions about the insurance arrangements in place for your properties and the basis on which charges are levied, please do not hesitate to get in touch.

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