SMEs urged to reassess property costs after landmark insurance rent ruling

A recent High Court ruling in favour of cinema chain Picturehouse has sent shockwaves through the UK’s commercial property sector, with major implications for both sides of the landlord–tenant relationship.

The case, which centred on the iconic Trocadero Centre in London, revealed that landlords had been receiving substantial commission payments of up to 60% of the premium on insurance policies charged to tenants through their leases. The court found that these commissions were not transparently disclosed, nor were they essential to the cost of insuring the property. As a result, the landlord has been ordered to pay back significant sums to the tenant.

While the case involved a high-profile property, the ruling could have far-reaching consequences for businesses across the country.

What does this mean for landlords?

The ruling should prompt an immediate review of their service charge practices and insurance arrangements.

Many SME landlords rely on managing agents or brokers to arrange building insurance, unaware that these arrangements may involve undisclosed commission payments. If these commissions are not made clear to tenants and aren't justified in the lease, landlords could face retrospective claims.

This could result in costly disputes and damage to long-standing tenant relationships, especially if the tenant feels they’ve been overcharged during a time when business costs are already under scrutiny.

What this means for tenants

For tenants, the ruling opens up new opportunities to challenge excessive service charges. Many businesses, and especially start-ups, accept insurance costs at face value as part of their lease obligations. But the court’s decision makes it clear that tenants may be entitled to reclaim charges where commissions were not transparently communicated.

What should you do now?

Whether you’re a landlord or a tenant, this case highlights the importance of transparency, lease clarity, and regular reviews of your commercial property agreements.

Landlords should:

• Review their leases to assess how insurance is dealt with.
• Identify whether commissions are being taken, and if so, whether they are disclosed.
• Consider renegotiating arrangements with brokers to improve transparency.

Tenants should:

• Request a full breakdown of insurance costs from their landlord.
• Review past service charge invoices for signs of excessive premiums.
• Seek legal advice to assess whether any part of those charges may be recoverable.

How we can help

For both landlords and tenants, specialist commercial property solicitors can provide vital support. For landlords, they can help audit leases, advise on exposure to claims, and renegotiate terms to ensure compliance. For tenants, they can review historic charges and leases, help gather evidence and pursue reimbursement where appropriate.

Final word

As the commercial property sector continues to recover from the economic shockwaves of recent years, this ruling serves as a reminder: clarity and fairness are not optional. Whether you're leasing out your only retail unit or occupying a small office space, understanding your legal rights and obligations around insurance rent could save your business thousands.