A cinematic insurance rent saga: London Trocadero (2015) LLP v Picturehouse Cinemas Ltd and other companies

The recent judgment in the case of London Trocadero (2015) LLP v Picturehouse Cinemas Ltd and others [2025] EWHC 1247 (Ch) provides essential direction on the application of insurance rent within commercial leases.

Background

This case concerned a long-running dispute between the landlord of London’s Trocadero Centre and its cinema tenant, Picturehouse Cinemas, which occupied the premises under two separate leases.

Under the terms of the leases, the landlord was responsible for arranging insurance for the entire Centre. The cost was then recovered from tenants via an “insurance rent,” calculated on the total insurance premiums paid by the landlord.

In arranging the insurance, the landlord adopted an increasingly common practice among commercial landlords: securing insurance policies that included inflated commission payments to brokers, which were then rebated back to the landlord. These hidden rebates, referred to in the judgment as the “Landlord’s Commission”, allowed the landlord to profit at the tenants’ expense. In some years, these commissions amounted to as much as 57% of the premium. As a result, tenants effectively paid more for the same level of insurance coverage, without receiving any corresponding benefit.

Compounding the issue, the insurers imposed significant policy excesses and co-insurance clauses due to fire safety concerns, including problems with the sprinkler system caused by the landlord’s renovation works.

Although the tenant continued to pay the insurance rent, it did so under protest, disputing the amounts and excesses claiming that landlord’s actions had led to inflated premiums. The tenant contended that the Landlord’s Commission did not constitute part of the “premium payable” under the lease and that an implied term should be read into the lease to restrict the landlord’s discretion in selecting insurers and structuring insurance arrangements.

The landlord, on the other hand, asserted that it was entitled to recover all insurance related costs, including the rebates, and resisted the implication of any such term.

Decision

The court found in favour of the tenant in part. It ruled that the landlord was not entitled to recover the Landlord’s Commission as part of the insurance premium under the lease, and that the tenant was entitled to restitution for the overpaid amounts.

In interpreting the lease, the court held that the wording did not justify including rebates received by the landlord within the recoverable insurance premium. To give business efficacy to the lease, the court implied a term requiring that the landlord’s insurance arrangements be conducted at market rates and on arm’s-length terms. Only the actual premiums paid for insurance could be passed on to tenants, not engineered rebates.

Separately, the court found that the landlord had failed in its duty to maintain the Centre’s sprinkler system between 2015 and 2020. This failure contributed to increased fire safety premiums. The tenant was not liable for these additional costs, and the court allowed for an assessment of damages caused by the landlord’s breach of its repair obligations.

However, the court rejected the tenant’s challenge regarding the policy excesses. It held that, while the fire safety issues may have led to higher excesses, the landlord had still ensured coverage for full reinstatement costs. Therefore, passing on the excesses to the tenant did not disturb the contractual allocation of risk under the lease.

Implications

This decision has significant implications for commercial landlords and tenants alike. It clarifies that landlords cannot recover commissions or rebates disguised as part of insurance premiums unless expressly permitted under the lease. Tenants may now have grounds to reclaim overpaid sums where landlords have profited from insurance arrangements without transparency or proper lease authority.

The ruling underscores the importance of clear and precise lease drafting, particularly regarding the calculation and recovery of insurance rent. Tenants are also likely to be more vigilant in questioning whether their landlords receive commissions on insurance policies and whether such arrangements are contractually permissible.