The end for landlords’ insurance commissions?

Implications for new leases

Landlords wanting to recover landlord's commissions in the future may, therefore, wish to include express provisions allowing them to do so, making it clear that a “premium” includes any amount equivalent to a landlord's commission, and ensuring the insurance premium is not tied to the insuring of the building.

Tenants will, however, undoubtedly be on their guard against the inclusion of such broad rights for recovery of insurance rent in new leases and may start requiring greater transparency around calculation of the premium and limits on what can be charged.

As the court emphasised in Trocadero, this will be all the more pressing for tenants who are contractually prevented from securing their own insurance, ie they are effectively “forced buyers” of whatever insurance the landlord is procuring.

Insurance rent clauses could even start to look more like service charge clauses, with obligations for landlords to account each year for monies spent on insurance. They may have to demonstrate that they have tested the market for the best premiums available and not taken large commissions at the tenants' expense.

Paragraph 9 of the RICS Code for Leasing Business Premises already states that, where landlords are responsible for insuring the property, the lease should require the policy to be on “normal market terms”. Details must be provided to the tenant on request, and the code includes an express obligation on landlords to “disclose to tenants whether the landlord benefits from insurance commissions”.

Landlords wishing to recover commissions may need to justify this by reference to particular services that they have provided in return, although brokers normally carry out this function (and Trocadero raises no issue with the recovery of brokers' fees). This may prove challenging, unless the landlord can show that it takes on functions normally undertaken by the insurers, such as claims handling. Otherwise, the administrative cost of putting insurance in place may simply be seen as part of the landlord's normal overheads, recoverable from the principal rents that they receive.

Wider market shift

The practice of landlords retaining commissions received from insurers has been common since the 1970s, and the judge in Trocadero indicated that the market norm was 28.75% for the period between 2015 and 2020. However, this case may mark a turning point, with tenants no longer willing to accept landlord's commissions or agree specific lease terms allowing landlords to recover commissions as insurance rent.

The Model Commercial Lease allows a landlord to “retain all insurance commissions for its own benefit”. However, this is subject to the “insurance premiums being reasonable and proper and reasonably and properly incurred”. Arguably, this allows landlords to keep any commission received, but contains a built-in safeguard along the lines of the implied term in Trocadero requiring insurance to be “reasonably and properly incurred”, which prevents landlords from using commissions to artificially inflate the amount of the premium, and perhaps even from adding commission to the premium payable by the tenant.

A change in market practice may also be driven by insurers. There was some indication in Trocadero that certain insurers had been unwilling to provide cover where high levels of landlord's commission would be included in the premium payable by tenants. Those who were willing to do so were reluctant to agree percentages as high as those paid to the landlord in Trocadero, due to possible reputational risks of such a scheme becoming public. This judgment may harden that approach.

Legislating against landlord's commissions

The subject of landlord's commissions has long been a live issue in the residential sphere and, following a consultation in 2023, the Financial Conduct Authority updated regulations through its Insurance Conduct of Business Sourcebook to limit brokers' ability to pay commission to third parties (including landlords) in a residential context. The Leasehold and Freehold Reform Act 2024 limits the recovery of landlord commissions in residential leases.

So far, however, there has been little government appetite for extending this approach to the commercial real estate market, but perhaps the amounts at stake in the Trocadero case – running to hundreds of thousands of pounds – may prompt it to reconsider the regulation of insurance recoveries in the context of commercial property.

Insurance rent payments under ongoing leases

Tenants under existing leases are likely to review their current insurance rent clauses carefully and consider what exactly is payable in light of Trocadero.

If the terms of the insurance rent clause are similar to those in the Trocadero case, the tenant may conclude that they are only required to pay the “premium” element of any insurance rent and they will not be required to pay any part attributable to landlord's commissions, although the precise wording of the clause would always have to be considered.

Even where there is an express right to recover landlord's commissions, such as there is in the MCL, the court's willingness to imply a term in Trocadero limiting the landlord's recoveries to insurance premiums at a market rate, negotiated at arm's length and in the ordinary course of business, could mean that landlords who have been recovering more than that (which was found to be 28.75% in Trocadero) could face claims from tenants. Landlords should therefore review their historic practices and be ready to justify insurance rent charged to tenants.

Challenges under ongoing leases

While limitation was not in issue in the Trocadero case, it could nonetheless have implications reaching back many years, opening up historic insurance rent payments from previous account periods. Landlords should be prepared for a barrage of questions from tenants about historic payments asking what proportion related to landlord's commissions and how those were negotiated and even claims for repayment of amounts of insurance rent relating landlord's commissions.

The tenant's claim in Trocadero was in restitution for payment of insurance rent to which the landlord was not entitled under the lease. Under the Limitation Act 1980, tenants will ordinarily be able to make such claims in contract for repayment of insurance rent going back six years. However, where an action is for relief from the mistaken understanding that the amounts were due, the limitation period will not begin to run until the tenant has discovered the mistake, or could with reasonable diligence have done so.

While this could give tenants more time to bring claims, given the publicity around the Trocadero case, tenants could arguably now be deemed to be alive to this issue and so, with reasonable diligence, could discover whether they had overpaid. The limitation period will start running from the date they could reasonably get the information necessary to assess any overpayment.

Is there still a place for landlord's commissions?

Landlord's commissions of the size charged in Trocadero may become a thing of the past, but is there still a place for them in insurance rent? A landlord securing a block policy over a large portfolio may be able to leverage its buying power to achieve lower insurance premiums than a tenant would be able to secure for its own unit. It could, in those circumstances, be considered justified for a landlord to accept an appropriate commission for arranging the discount if the premium that the tenant pays represents a better deal than would otherwise be available on the market.

Nonetheless, the fallout from the Trocadero judgment is likely to increase market sensitivity around insurance rents. Tenants may be unwilling to entertain the idea of landlord's commissions and argue that arranging insurance should just be seen as part and parcel of being a landlord.

An earlier version of this article was published in Estates Gazette on 24th June 2025.

Authored Mathew Ditchburn and Lucy Redman.