Octagon Overseas Ltd and Canary Riverside Estate Management Ltd vs Sandra Cantlay and Others

This case concerned a dispute between landlords and leaseholders over the liability to pay gross insurance premiums without receiving credit for commissions and fees received by the landlords.

TLDR:

• Leaseholders challenged the reasonableness of insurance commissions and fees.
• The First-tier Tribunal ruled in favor of the leaseholders, finding the commissions unreasonable.
• The Upper Tribunal reduced the commission payable from £1,517,372 to £536,182.
• The case highlights the importance of transparency and reasonableness in landlord-tenant insurance arrangements.

Canary Riverside is a large residential and commercial estate in East London, comprising five residential towers, a hotel, and various commercial units. The freehold of the estate is owned by Octagon Overseas Ltd (Octagon), and the estate is managed by Canary Riverside Estate Management Ltd (CREM) under a headlease granted in 1997.

The dispute arose when the leaseholders, members of the Residents' Association of Canary Riverside, challenged the reasonableness of insurance commissions and fees charged by the landlords. The First-tier Tribunal (FTT) found that the leaseholders were not liable to pay service charges totaling £1,517,372 in respect of insurance and associated insurance premium tax of £121,338, as these sums were received by the landlords' agents as commission from the insurers.

The FTT granted permission to appeal its decision on two grounds. The Upper Tribunal, presided over by Martin Rodger KC, Deputy Chamber President, heard the appeal. The issues in the appeal were concerned with the extent of the leaseholders' contractual liability to contribute to the cost of insurance where the landlord had received a commission from the insurer out of the gross premium it had paid, and with the reasonableness of the charges in this case.

The Upper Tribunal found that the FTT was wrong to interpret the headlease in such a way that the gross insurance premium was not recoverable from the leaseholders. The tribunal concluded that the cost of the insurances required by the headlease was the gross premium agreed between the broker and the insurer, which included commissions paid to the landlords' agents.

However, the tribunal also found that the landlords had failed to demonstrate that the commissions paid to their agents were reasonable. The Upper Tribunal determined that the leaseholders were liable to pay £536,182 for the work of the landlords' agents, including insurance premium tax, instead of the £1,517,372 originally claimed.

The case underscores the importance of transparency and reasonableness in landlord-tenant insurance arrangements. It highlights the need for landlords to provide clear and accurate information about insurance commissions and fees to ensure that leaseholders are not overcharged.

Legal representatives: David Halpern KC and Justin Bates, instructed by Freeths LLP, for the appellants; Jonathan Upton and Mattie Green, instructed under the Bar Public Access Scheme, for the respondents.

Judicial Panel: Martin Rodger KC, Deputy Chamber President

Case Citation Reference: [2024] UKUT 72 (LC)