The case of Canary Riverside Estate LON/00BG/LSC/2019/0277 will be welcome reading for leaseholders that find themselves subject to demands for payments on top of their insurance premiums which relate to commissions.

Arrangements featuring freehold companies or management companies having related companies that offer insurance and brokerage services are common, as professional landlords seek to create additional revenue streams from leasehold properties. And whilst each case and lease will turn on its own facts, the First-tier Tribunal held that some £1,517,000 in payments to the managing agents should not have been charged to the leaseholders, and was not payable.

In many cases, there can be a lack of transparency as to what various parts of the insurance costs are made up of, and in this case the leaseholders had to fight a protracted legal battle even to establish the proportion of their money that had been taken as commission, rather than going towards the insurance of the building, as the lease intended.

The Tribunal Judge commented that:

“The sums involved are large and constitute a very substantial percentage of the premium towards which leaseholders were asked to contribute, without any notification to them as to the nature and amount of the commissions involved. It was only through these proceedings that the full extent of these commissions became apparent”.

The case is likely to be appealed to the Upper Tribunal given the sums involved however this case could be a useful tool in challenging sums taken for services that leaseholders did not agree to pay and which in some cases offer little to no value.

Ricky Coleman is a solicitor in our Landlord and Tenant team and would be pleased to assist with service charge and related issues.