Commercial Landlords Urged to Reassess Insurance Premiums
Landmark Court Ruling Shakes Up Service Charge Recoverability
A pivotal legal ruling has reshaped how landlords in the UK can recover insurance costs through service charges.
The Upper Tribunal has clarified that lease terms must be strictly adhered to when passing insurance premiums on to leaseholders.
This decision underscores the need for all landlords—especially those managing leasehold properties—to immediately revisit their lease structures and insurance agreements.
Key Case: Lease Interpretation is Crucial
In Assethold Limited v. 15 Leaseholders of St John’s Court, the tribunal ruled that only costs explicitly authorised by the lease could be passed on to tenants.
The case centred around whether the landlord could recover insurance costs arranged by a superior landlord. The tribunal concluded that such costs, if not specifically outlined in the lease, are not recoverable through service charges.
Implication: Landlords cannot assume they are entitled to recover insurance expenses unless the lease clearly provides for it.
Why Landlords Must Review Insurance Arrangements Now
Risk of Non-Recoverable Charges
Thousands of leases in the UK may contain ambiguous or outdated clauses. Landlords relying on superior landlords for building insurance—especially under head leases—may find themselves unable to recover these costs legally.
We strongly advise landlords to conduct a thorough lease audit, checking:
- Who is named as responsible for insurance?
- Is there a clause allowing recovery of insurance premiums?
- Does the lease specify that the policy must be “in the joint names of landlord and tenant”?
If such details are missing or unclear, landlords face challenges when recovering costs and may even have to refund past charges.
Impact on Freeholders, Managing Agents and RTMs
The ruling doesn’t just affect private landlords. Right to Manage (RTM) companies, housing associations, and managing agents must also comply. Failure to do so could result in costly disputes, Tribunal hearings, and reputational damage.
Insurance Premium Commission: Growing Scrutiny
Recent reports suggest some landlords and agents have historically received commissions from insurers—sometimes hidden from leaseholders.
The Leasehold Reform (Ground Rent) Act 2022 and the Building Safety Act 2022 have already begun tightening controls, and this tribunal ruling adds further pressure.
Transparency is no longer optional. Landlords must disclose:
- The cost of the premium
- Any commissions earned
- Whether the policy covers the correct risks (e.g., cladding, fire risk)
Best Practices to Protect Your Position as a Landlord
Conduct a Lease Compliance Review
Ensure all your leases:
- Include precise wording authorising recovery of insurance costs
- Permit premiums paid by superior landlords to be recharged
- Define the insurable risks clearly
- Allow reasonable administration charges
If clauses are missing or ambiguous, consult a solicitor about lease variation or rectification.
Document the Insurance Procurement Process
Maintain a clear audit trail of:
- Policy quotes from multiple insurers
- Decision-making rationale
- Confirmation of compliance with lease terms
This helps defend your position if challenged at Tribunal.
Disclose All Commissions and Rebates
Make it a policy to disclose:
- Broker commissions
- Fee arrangements with insurers
- Rebates applied to portfolios
This builds trust and meets increasing regulatory expectations.
Consider Leaseholder Consultation
If you need to change insurers or significantly increase premiums, consult leaseholders in advance—even if not legally required. This avoids disputes and improves relations.
The Legal Landscape: More Reform is Coming
With the Law Commission reviewing leasehold laws and widespread political calls for reform, we expect further regulation of insurance charges, transparency, and service cost recovery. The direction is clear: tenants and leaseholders are gaining more protection.
Landlords who fail to adapt risk:
- Tribunal challenges and reimbursement orders
- Fines or compliance notices
- Damaged reputations in property circles
Flowchart
A Landlord Adds Insurance Premium to Service Charge -->
B Is Premium Recovery Allowed by Lease?
B -- Yes --> Disclose Premium Details to Leaseholder
B -- No --> Landlord Cannot Recover Premium
C --> Does Leaseholder Dispute Charge?
E -- No --> Cost Recovered
E -- Yes --> Case Referred to Tribunal
G --> Tribunal Checks Lease Terms
H -- Permitted -->
H -- Not Permitted --> Landlord Ordered to Refund Charges
Action Plan for UK Landlords – June 2025 Update
- Review lease clauses governing insurance and service charge recovery.
- Consult legal experts to interpret lease language and recommend changes.
- Switch to transparent insurance arrangements with no hidden commissions.
- Retain full documentation of quotes, decisions, and communication with leaseholders.
- Prepare for Tribunal proceedings by anticipating likely disputes and building your defence now.
Final Thought
Insurance premiums can represent one of the largest costs passed through service charges.
Yet, without precise lease wording and transparent processes, landlords may lose their right to recover these expenses entirely. The recent Upper Tribunal ruling is a decisive reminder that lease compliance isn’t optional—it’s essential.
Landlords who act now can avoid disputes, retain profitability, and build trust with leaseholders. Those who delay risk costly legal consequences.
Useful External Links
- Upper Tribunal Decision Summary – Judiciary UK
- Leasehold Advisory Service – Insurance Charges
- RICS Professional Guidance on Service Charges
Key Statistics on Insurance Charges and Leasehold Disputes (UK – 2025)
- £1.6 billion – Estimated annual total paid by UK leaseholders in insurance premiums (Source: Leasehold Knowledge Partnership).
- 23% – Proportion of leaseholders who were unaware they were paying insurance commissions to landlords or managing agents (2024 LKP survey).
- £200–£500 per year – Typical insurance cost per leasehold flat in England and Wales.
- Over 50% – Percentage of First-tier Tribunal service charge cases in 2024 that included insurance cost disputes.
- £40 million+ – Total refunds and compensation ordered by Tribunals in insurance-related disputes over the past five years.
- 75% – Number of leaseholders who would support mandatory transparency of insurance commissions (according to Leaseholder Reform Poll 2024).
- 7,000+ cases – Filed in 2024 related to unfair service charges, a 12% increase from 2023.
- £8,750 – The highest known single insurance commission uncovered in a 2023 leasehold service charge dispute (revealed during a Tribunal hearing).
- 98% – Of long leases reviewed in recent studies did not include clear language allowing recovery of insurance premiums paid by superior landlords.
These statistics highlight the urgency for landlords to reassess lease compliance and insurance cost recoverability. Ignoring lease terms or failing to disclose insurance arrangements can lead to costly disputes and legal consequences.
❓ Frequently Asked Questions (FAQs)
Can I still recover insurance premiums from leaseholders after the recent court ruling?
Only if your lease specifically allows it. The recent Upper Tribunal ruling confirms that insurance premiums can only be recovered through service charges when the lease explicitly provides for it. General clauses are not enough—wording must be clear and unambiguous.
What if the superior landlord arranges the insurance?
You may not be able to recover the cost unless the lease permits you to pass on premiums arranged by a superior landlord. If the lease doesn’t mention this, you could be liable for the full cost yourself.
Does the ruling affect all landlords?
Yes. This ruling applies to private landlords, housing associations, managing agents, Right to Manage (RTM) companies, and freeholders. If you recover service charges under a long lease, you are affected.
Can I change the lease to allow for recovery of insurance costs?
Yes, but it requires the leaseholder’s agreement and formal legal variation. This can be time-consuming and is usually only possible if all parties agree. Consult a property solicitor if your lease needs to be updated.
Are insurance commissions now illegal?
No, but they are under increasing scrutiny. Hidden commissions can be challenged, and failing to disclose them may lead to legal disputes or Tribunal cases. Best practice is full transparency.
What documents should I keep to protect myself?
Keep a clear audit trail, including:
- Lease clauses relating to insurance
- All insurance quotes
- Details of commissions or fees
- Correspondence with leaseholders about insurance
What happens if a leaseholder disputes the insurance charge?
The matter can be referred to the First-tier Tribunal. The Tribunal will examine the lease and supporting evidence. If the clause does not support the charge, you may have to refund it with interest.
Can leaseholders request information about the insurance policy?
Yes. Under Section 21 and 22 of the Landlord and Tenant Act 1985, leaseholders have a legal right to request a summary of service charges and inspect related documents, including insurance policies.
What’s the penalty if I’ve wrongly charged for insurance?
You may be ordered to:
- Refund charges in full
- Pay leaseholder legal costs
- Compensate for poor management practices
- Adjust future billing processes
What steps should I take now as a landlord?
- Review all lease documents
- Consult a solicitor if unsure
- Ensure insurance premiums are recoverable under the lease
- Disclose all commission and policy details
- Prepare for leaseholder questions or Tribunal scrutiny
Useful External Links for Landlords
Here are reliable and authoritative sources to help landlords navigate insurance cost recovery, lease compliance, and legal responsibilities in light of the recent court ruling:
- First-tier Tribunal (Property Chamber) – Information on how to challenge service charges and the Tribunal process
- RICS Professional Guidance on Service Charges in Residential Properties
- Upper Tribunal (Lands Chamber) – Recent Decisions and Case Summaries
The British Landlords Association is a national landlords association for UK landlords. It is one of the largest landlord associations in the UK. Join us now for £79.95!
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