More results...

Generic selectors
Exact matches only
Search in title
Search in content
Post Type Selectors
Filter by Categories
Assured Shorthold tenancy
Benefits and care
Housing Conditions
Housing law - All
Introductory and Demoted tenancies
Leasehold and shared ownership
Licences and occupiers
Mortgage possession
Regulation and planning
Trusts and Estoppel
Unlawful eviction and harassment

Insurance premiums and commissions


Canary RIverside Estate LON/00BG/LSC/2019/0277 (copy decision here via Leasehold Knowledge Partnership)

This was the FTT’s decision on an application by the residential leaseholders of the Canary Riverside Estate challenging the insurance premiums they had had to pay over the 10 years since 2010/11. The freeholder is Octagon Overseas Ltd (a John Christodoulou company). The head lessor is Canary Riverside Estate Management Ltd (CREM) (a John Christodoulou company – via the Yianis Group of companies). Also involved is Westminster Management Services Ltd (WMS) (which the respondents denied was a Yianis Group company but about which the Tribunal notes that the leaseholders argued that

that WMS appears to be a Yiannis Group company which employs senior staff whose responsibilities extend across the Yiannis portfolio of properties, including the company secretary, in-house solicitors, and financial controller. In evidence, Mr Curtis (of WMS, CREM and Octagon) said that whilst WMS is not within the Yiannis Group of companies, he is employed by WMS, as are the directors of several of the Yiannis Group companies. CREM, he said, did not have its own employees. Those engaged with work on behalf of CREM were all employed by WMS.

So, WMS’ separation from Octagon and CREM is minimal.)

It appears that Octagon instructed WMS to obtain insurance for the development, mostly as part of a portfolio-wide insurance policy. WMS then instructed insurance brokers (Reich) to find insurance.

The primary issue for the insurance premium was that it transpired that the broker and WMS were both being paid substantial commissions. This information had to wrung out of the brokers, with various disclosure applications. WMS, Octagon and CREM made no disclosure at all on this. The applicant leaseholders argued that this proportion of the premium was not payable and not reasonably incurred.

The Tribunal found that a commission could be retained in two circumstances.

Firstly, where the lease expressly provided for this to happen. In this case, the headlease between Octagon and CREM did provide for the freeholder to keep any insurance commission, under a clause dealing with ‘insurance rent’. The sub-leases entitled CREM to pass on ‘Insurance rent’ costs to the residential leaseholders.

But no commission was paid to Octagon, it was paid to WMS and the brokers. No details of any contract between Octagon and WMS had been put in evidence, and there did not appear to be any basis on which WMS was taking the premium on Octagon’s part.

Secondly, via Williams v London Borough of Southwark (2000) All ER (D) 377, a commission could be retained where it was a payment for work done. (In that case, effectively for the landlord doing work for the insurer, which would otherwise have been fees chargeable to the leaseholders).

These work related fees would still be subject to reasonableness.

The respondents argued that WMS had done work in relation to obtaining the insurance, and that the payments therefore fell under ‘insurance rent’ in the headlease and were recoverable by CREM from the sub-leaseholders.

The Tribunal found

In our determination, any payment for the work that WMS is said to have carried out, as described at paragraph 36 of Mr Curtis’ witness statement, and in his oral evidence at the hearing, did not amount to “sums… (paid) in respect of the insurances required by Clause 6.1(i) (ii) and (iv)…” of the Headlease and which can be recovered from the Applicants. In the tribunal’s view this is a narrow definition which extends to costs of and related to the insurance itself, and not to the landlord’s own activities connected with taking out or claiming on insurance. As such, sums paid for WMS’s activities do not fall within the definition of Insurance Rent, and there is no contractual liability on the Applicants to contribute towards these costs. We conclude that all the work said to have been carried out by WMS is more accurately described as the provision of services concerning management of the Estate, including obtaining insurance.

Responsibility for obtaining insurance for the Estate rests with the landlords. If they had discharged that responsibility themselves, rather than appointing WMS, matters such as liaising with Reich, arranging insurance surveys and reinstatement valuations (as opposed to the cost of the valuations themselves, which is covered by “Insurance Rent”), seeking quotes for insurance repairs, and all the other work described by Mr Curtis, would all have concerned management of the Estate. Prior to the appointment of the Manager, CREM’s ability to recover such costs of management from leaseholders would have depended on the service charge provisions in their leases concerning recovery of management costs.

Some of the costs may possibly have been recoverable under the service charge as costs ‘of the management, administration and supervision of the residential buildings on the Estate.’ But they were not so demanded, and would of course also have been subject to being reasonable in amount. WMS had not been the managing agent of the Estate, that had been a company called Marathon Estates prior to the appointment of a Tribunal manager in 2016.

This was a pure commission and there was no contractual liability on the applicants to pay these costs. It also followed that the relevant element of the Insurance Premium Tax was also not payable by the sub-leaseholders.

The commission to the broker, on the other hand, was in relation to work done in placing the insurance, and so did fall under ‘insurance rent’ clause in the headlease, was recoverable from the sub-leaseholders, and was reasonable in amount.

Various other challenges to financing charges for the insurance premium, to the ‘rebuild value’ of the Estate, and to the apportionment of insurance costs were not successful and were dismissed.


If you are wondering why this litigation was hard fought over an extended period, the unpayable insurance premium and IPT was calculated at about £1,638,000 over the 10 years, of which £1,517,000 was the commission paid to WMS. It is clear that something similar has very likely been happening on other parts of the Christodoulou portfolio, as the commission were paid on the portfolio wide insurance. These are substantial amounts of money.

In its conclusion, the Tribunal says

In her closing submissions Ms Jezard explained how exhausting the long-running litigation regarding the Estate has been for her. We have no doubt about the sincerity of that remark. We commend her for the way in which she has conducted herself throughout the proceedings on behalf of the Applicants. There can be little doubt that the information finally provided by Reich regarding the amount of commission it retained, and the fees paid to WMS, would not have emerged if not for her determined efforts.

The service charge accounts are silent on the question of commissions and fees; the amount of commission said to have been retained by Reich in the Respondents’ 28 August 2020 statement was woefully inaccurate, as was the figure specified in the schedule provide three months later, in November 2020,


It was only following the second Rule 20(1) (b) order that any meaningful information regarding the amount of commissions retained, and fees paid eventually emerged.

We agree with Ms Jezard’s closing remarks about the need for greater transparency in insurance fees and commission charges. Paragraph 12.1 of the 2013 RICS code states that Insurance fees (including commissions) and all other sources of income and related income or other benefits in relation to the service charge arising out of the management should be declared annually to the client and to leaseholders and should reflect the level of work carried out. We urge the Respondents to ensure compliance with these recommendations in future.

This should indeed absolutely be the case.

That said, it is probably inevitable that this decision will be appealed. The view of the Upper Tribunal on insurance commissions will be to follow…

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts.

1 Comment

  1. Andrew M

    Some say…A large part of commission is that the broker brings the business to the insurer and is at first glance an acceptable commercial arrangement, The % commission comes from the premium and not an add on to a premium- the premium is not x plus but x with a commission to a broker. What is of concern is that 1 where a management fee is added and commonly includes arranging insurance ( except say for reinstatement valuations) and dealing with claims, an agent can get paid twice. 2 that in practice the commission say 20% can become say 40 % by comparing a premium for building or estate taken to the market as opposed to adding them to a wider portfolio and negotiating down the rates. Let us not even get into the murky world of claims management to keep claims down or that a small commission is declared by an agent and an arms length or independent broker takes a commission which they are not required to disclose in the same way as an agent must. The agent and broker then have a separate arrangement for rebates.


Leave a Reply (We can't offer advice on individual issues)

This site uses Akismet to reduce spam. Learn how your comment data is processed.