Background – What happened?

Originally in 2020, London Trocadero (2015) LLP (“London Trocadero”), as the freehold owner of the Trocadero Centre (“the Centre”) in London, brought a claim against its tenant, Picturehouse Cinemas Limited (“Picturehouse”), for payment of rent arrears in the sum of £2.9 million. Both Gallery Cinemas Limited (the original tenant under the lease) and Cineworld Cinemas Limited (the guarantor) were also named as defendants.

The claim for rent arrears was successful following an application for summary judgment. However, during the course of those proceedings, Picturehouse brought a counterclaim relating to the amount of “insurance rent” charged to them by London Trocadero. It is this issue which was before the Court during a seven-day hearing in March 2025.

Dispute Resolution Senior Associate Charles Grossman and Business Support and Legal Assistant Amelia Martin explain the case and key takeaways.

Picturehouse occupied part of the Centre to run a cinema (“the Cinema”) pursuant to two separate leases: one dated 20 June 1994 (“the 1994 Lease”) and the other dated 18 September 2024 (“the 2024 Lease”).

London Trocadero, as landlord, is responsible for insuring the Cinema and is entitled under the leases to charge an insurance rent to Picturehouse. The insurance rent was charged as the full amount of the insurance premium, including not only the insurer’s core charge but also commissions payable to both Trocadero and Trocadero’s insurance broker.

Commercial property insurance generally requires a landlord to pay a premium covering the entire building, with lease terms allowing recovery of this cost from tenants as “insurance rent,” usually apportioned by unit size or risk.

Under the 1994 Lease, Picturehouse had agreed to pay insurance rent equivalent to the amount Trocadero’s insurer assessed as necessary to keep the Cinema insured. In practice, however, this insurance rent was made up of three distinct components. By way of example, the costs in 2018 were:

• Net premium – £79,000 (the cost to insure the Centre)

• Broker’s commission – £9,000

• Trocadero’s commission – £88,000

Picturehouse argued that the “landlord’s commission” did not fall within the wording of the covenant in the 1994 Lease—more specifically, that they were only required to pay the “amount payable… by way of premium for keeping the Centre insured”—and therefore the tenant contended that they had no contractual obligation to pay the landlord’s commission.

The “landlord’s commission” was, in effect, a commission rebated to Trocadero by its brokers and then recharged to Picturehouse.

Judgment – What was the outcome?

The High Court decided in favour of Picturehouse and agreed that the 1994 Lease did not permit Trocadero to recharge Picturehouse for the “landlord’s commission.” Only sums which were, in fact, paid for keeping the Centre insured could be recharged. The Judge noted:

“Even if Landlord’s Commission does form part of a premium, it is rebated as part of arrangements that the Landlord itself, through its agent CCL, engineered.”

This meant that Picturehouse was entitled to be repaid all of the “landlord’s commission” which had been charged to them over a period of several years—a significant sum—under the law of restitution.

The 1994 Lease allowed Trocadero to recover costs in other situations, but it did not specify that the landlord could recover the cost of arranging insurance. This suggested that such costs were considered normal business expenses for the landlord, to be covered by rent, and categorised as “Costs of the Landlord’s letting business which is to be paid out of the receipt of rent.”

Although the landlord included a commission in the insurance premium, it was not a commission for the insurance itself—it was a way for the landlord to generate additional income at the tenant’s expense, with the landlord controlling the level of commission charged.

Takeaways

• If landlords are, or have been, charging their commercial tenants a “landlord’s commission,” there is a risk that they could be exposed to a claim by their tenants. Whilst Picturehouse was successful in this instance, it very much depends on the specific wording of the lease covenant. Landlords should carry out a review of their portfolios to understand what sums they can and cannot charge tenants by way of insurance rent.

• If landlords have been charging sums to tenants that are not recoverable under their leases, any claims tenants may have are subject to a six-year limitation period—not a twelve-year limitation period (which applies to claims brought under a deed). This is because Picturehouse’s claim was brought under the law of restitution, which applies where a defendant has been unjustly enriched at the expense of the claimant. Restitution claims are time-barred after six years.

• Portfolio landlords should ensure their precedent leases are drafted in a way that allows them to recover all intended costs, in light of this ruling.

If commercial landlords or tenants would benefit from advice on the issues arising out of this case, or assistance with reviewing their leases, please contact Charles Grossman.