First-tier Tribunal Rules on Reasonable Insurance Commissions for Leaseholders

OUTCOME: Allowed in Part

© CROWN COPYRIGHT 2026

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : CHI/OOHN/LSC/2024/0023 Property : [ADDRESS], [POSTCODE] Applicant : [redacted] : [COUNSEL] Respondent : [redacted] : [RESPONDENT] [COUNSEL] [NAME] of application : An application under section 27A Landlord and Tenant Act 1985 Tribunal : [NAME] [NAME] [NAME] : [ADDRESS], [POSTCODE] Date of Hearing/Directions/Determ ination : 2 / 4 February/ 13 April 2026

Decision

DECISION 1. The Tribunal determines the service charge payable in respect of Flat 48 for the insurance commission payable for the [NAME] agent, through the service charge collected by the [NAME] agent is as set out below. Year 2019 2020 2021 2022 2023 2024

2 £ 24.77 23.74 28.74 35.92 42.60 45.22

2. The Tribunal determines the service charge payable in respect of Flat 48 for the insurance commission payable for the [NAME] agent, through the service charge collected by the [NAME] agent is, unaltered and set out below. Year 2019 2020 2021 2022 2023 2024 £ 51.40 101.10 99.28 100.59 130.33 145.33

3. The Tribunal grants an Order under section 20 C of the Landlord and Tenant Act 1985 and paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002. The Order is for prevention of costs incurred by the [NAME] agent in these proceedings being place on the service charge or administrative charge of the [NAME] of Flat 48, but limited to the point at which the applicant made their application for permission to appeal, until the receipt of this determination. Background 1. The application dated 5 February 2024 challenged the service charge for the years 2018 to 2024 inclusive and requested orders under section 20C of the Landlord and Tenant Act 1985, and paragraph 5A of Schedule 11 of the Commonhold and Leasehold Reform Act 2002.

2. The Tribunal heard the case and gave a decision dated 11 April 2025.

3. The applicant appealed the decision, and the Upper Tribunal ([NAME]) granted permission to appeal on 4 August 2025.

4. By Order of the Upper Tribunal ([NAME]) dated 20 October 2025, the appeal is allowed in part and its determinations recorded in paragraphs (1) (2) and (3) of the decision of 11 April 2025 are set aside.

5. Specifically; “2. The appellant’s application under section 27A of the Landlord and Tenant Act 1985 is remitted to the First-tier Tribunal for further consideration, limited to the issue of insurance commission (not including any further challenge to the sum insured ) and the consequential reconsideration of applications under section 20C , Landlord and Tenant Act 1985, and paragraph 5A of Schedule 11, Commonhold and Leasehold Reform Act 2002. 7.As I explained when granting permission to appeal, the second limb of the appellant’s case on insurance before the FTT was a challenge to the level of commissions charged as part of the premium. It was clear from paragraph 51 of his statement of case and from the Scott schedule that the complaint concerned the total commissions charged (i.e. the aggregate of the sums payable to the [NAME] and to the respondent’s [NAME] agent.

3 8.In its original decision the FTT dealt only with commission payable to the respondent's [NAME], holding (implicitly) that 15% was a reasonable commission provided it was applied to the net commission payable to the [NAME], nor did it refer to the appellant’s reliance on the [NAME] review into insurance remuneration and his contention that the FCA supported an upper limit on total commission of 30%.

9. In its refusal of permission to appeal the FTT confirmed its understanding that the applicant’s challenge had been both to the [NAME] agent’s commission and to the [NAME]’s commission. It made no determination of whether either the total commission or the commission paid to the [NAME] were reasonable. Part of the appellant’s case was not considered and this challenge to the total commission remains undetermined. It is therefore necessary to set aside the [NAME] determination that the sum charged in respect of insurance was payable and to remit the issue for consideration. 10.The [NAME] decision is set aside only to the extent that it concerns insurance commission and consequential orders relating to the costs incurred by the respondent in the proceedings.” Re hearing in respect of Insurance Commission resubmitted to the First-tier Tribunal 6. The hearing at the Havant Justice Centre on 2 February 2026 was to address that which was remitted by the Upper Tribunal ([NAME]) in paragraph 5 above.

7. The applicant [APPELLANT] of Flat 48 was represented by [APPELLANT]. The respondent, [RESPONDENT] was represented by [RESPONDENT] [NAME], of [COMPANY].

8. The Tribunal hearing solely considered the commission charged on the insurance premium for the years 2018 to 2024. The Tribunal first concerned itself with the service charge year 2024, in order to first establish the basis of how the various figures were arrived at. 9. [NAME] of [COMPANY] set out her understanding of the way the premiums and commissions are calculated. The calculation starts with the insurance premium for the buildings and estate net of commission, net of arrangement fee and net of insurance premium tax.

10. The combined commission of the [NAME] and the [NAME] agent are then added to the net insurance premium. The Tribunal heard the combined figure of commission which is added to the net insurance premium was £13,366.77.

11. To this is added an administration fee of £25.00.

12. The foregoing three items; net insurance premium, combined commissions and administration fee, are then totalled, which gives £32,226.34. This £32,266.34 is then subject to insurance premium tax of 12%. This amounts to an addition of £3,867.16.

4 13. The contributing elements are then totalled to give the gross premium which is the subject of the service charge challenge. This calculation is set out in the table below.

£ £ £ Insurance premium for the [NAME] (Net) 18,834.77

Combined commission for the [NAME] and the [NAME] agent 13,366.77

Administration fee 25.00

Sub total

32,226.34

Application of Insurance premium tax of 12%

3,867.16

Gross insurance premium.

36,093.50

14. The Tribunal also heard from [NAME] of [COMPANY] about how the commission was apportioned between the [NAME] agent and the [NAME].

15. The apportionment being £8,238.46 for the [NAME] and £5,128.11 for the [NAME] agent.

16. The respondent presented evidence on how the commissions were calculated, potentially comprising a 10% commission on the net insurance premium with an additional 5% for claims handling and a further 5% for calculation of premium associated with considered risk. The respondent noted that a figure equivalent to 10% of the net insurance premium was then deducted from the foregoing and allocated to the [NAME] agent. The respondent then identified that there were in fact two different policies involved, one for the land and buildings and a second for terrorism.

17. It became clear to the Tribunal that the picture was confused. The respondent offered to gain more detailed figures, and a more detailed explanation from the [NAME]. 18.The Tribunal considered on the face of it the cumulative amount of commission as a percentage of the net premium, amounted to some approximately 71%.

5 19. The applicant relied on the Financial Conduct Authority guidance known as Policy PS23/14, the applicant saying that this guidance advised commissions should be within the range of 15% to 30% of the net premium.

20. Given the differences between the parties the Tribunal adjourned the` hearing and Directions were provided. Adjournment and Directions 21. The relevant Direction reads as follows; The respondent to provide the applicant and the Tribunal (i) a document that sets out for 2024 how the respective commission figures of £8238.46, for the [NAME] and £5128.11 for the [NAME] agent are calculated (ii) how the presence of the two differing policies impacts on these figures (iii) what the respective duties are for the [NAME] agent and the [NAME] in respect of the insurance policy, claims handling and any other material matters (iv) whether the position in the previous years, that of 2018 to 2023, materially differs and if so how (v) finally, commentary on how the FCA Policy PS23/14 has been applied to the respective commissions. The submission in respect of this to be with the Tribunal and the applicant by 18 February 2026 4:00pm.

22. The applicant to provide their Reply to the respondent's statement by 2 March 2026 4:00pm. The Reply to be sent to the respondent and the Tribunal.

23. The Tribunal to make the determination on the issue on the papers in the fortnight following the 3 March 2026. Paper Determination including submissions received under [NAME] of the 4 February 2026.

24. The Tribunal was furnished by a number of documents. From the respondent; Document Title pages [NAME] to Directions 5 A [NAME] of commission 1 B Property Owners Certificate 1.10.24 to 1.10.2025 1

6 C From [NAME] commission 2 D Delegated Authority (DA) Added Value 2 E FCA Policy Statement PS23/14 20 F Disclosure document Issued 2 G [NAME] 2023 2

25. The Applicant then submitted a Reply dated 2 March 2026 to the documents submitted by the respondent. This comprised 10 pages.

Submissions Respondent 26. [NAME] requested further explanation of the construction of the premium for the year 2024 with evidence of how the respective commissions of £8,238.46, for the [NAME] and £5,128.11 for the [NAME] agent are calculated 27. The respondent document B “Property Owners Select Certificate” shows the total premium as £38,498.34 and that it is made up of “total premium” £34,373.52 and “£4,124.82” insurance premium tax.

28. The respondent document F “[NAME] Document” shows the total premium including tax “£38,498.34”. It shows total commission of £11,736.19 which is said to be comprised £ 6,678.35 for [NAME], and for [NAME] £5,057.84.

29. These figures do not accord with the request made in [NAME]. The figures submitted by the respondent are for the 12 months of insurance commencing 1 October 2024. 30.Document A from the [NAME] sets out their view on how the net premium of 1 October 2024 to 1 October 2025 of £34,523.52 becomes the gross premium including tax of £38,523.34. 31.Document C is an email from the [NAME] to the [NAME] explaining their commission structure. The email is dated 14 November 2024. The email states that the commission is 25% of the gross written premium. Of the 25%, 15% is passed to the [NAME] and 10% retained by the [NAME]. In addition to the 10% of the gross premium that is retained there are a further two additions. The first is 5% for “full claims authority” which covers staff handling of property owners claims from “in their entirety”. The second is 5% for “underwriting delegated authority” This being, underwriting the risk

7 associated with blocks of flats, within certain criteria and includes document issue risk profiling and premium calculation. Applicant 32.The applicant first identifies that they are no longer relying on the FCA expected range of commission 15 to 30% because, whilst these were observations, at the early stage of the consultation process they were not adopted.

33. The applicant submits that the FCA rules required regulated firms to treat freeholders and [NAME] as “customers” with an equal emphasis on both. 34.At paragraph 4 the applicant asserts the brokers methodology is flawed by determining commission as a percentage of the gross premium rather than as a percent of net premium.

35. The applicant at paragraph 5 asserts the FCA is critical of premiums based on percentage rates, the applicant contending that a percentage-based commission basis would not meet the FCA “fair value” requirement. In particular the FCA is critical of high levels of commission with intermediaries often failing to justify how this offered value to [NAME].

36. The applicant contends that the commissions do not meet the FCA “Fair value” requirements.

37. The applicant submits in paragraph 11, that the methodology set out in Document C is flawed, and that the services are for the benefit of the [COMPANY] and so the applicant cannot see why the [NAME] should be charged for them.

38. At paragraph 12 the applicant contends that “work transfer fees” are double payments and should be disallowed.

39. At paragraph 13, the FCA states that for “standard commission” the commission should not increase simply because the premium increased. As the FCA notes that fair value should be “a fair and reasonable relationship between the amount paid and the benefits provided to the customers.” 40. At paragraph 30 the applicant asserts that reimbursement has not taken place for commission paid on the lift engineering contract and that a section 20 consultation fee regarding the balcony renovations has been charged. The Tribunal comments these are matters outside the scope of [NAME] and the Tribunal has made no finding on these. Findings What is the service charge year? 41. That the accounting period for the service charge as set out in the lease in [46/395] is 24 June to 23 June, so the service charge year ends 23 June.

8 What is the insurance period? 42. Insurance premium year is for period of 12 months from 1 October. So, for the 1 October 2024 insurance premium falls due in the June 2025 service charge. What was the total premium paid for the insurance period starting 1.10.2024 43. From Document B of the respondent’s submission, we find that the total premium paid for the year 1.10.24 to 1.10.25 was £38,498.34 What was the total commission paid for the insurance period 1.10.2024? 44. From Document F, the total commission is shown as £11,736.19, with [NAME] receiving £5,057.84 and [NAME] receiving £6,678.35. Although Document A gives slightly different figure of £11,721.19. The Tribunal prefers the figure in Document F given it is derived from the actual insurance policy. What is the rate of the IPT? 45. From the evidence of the respondent in the first part of the hearing, we find the insurance premium tax is 12%. This is supported by Document A. What is the admin charge? 46. From the evidence of the respondent in the first part of the hearing, we find that an admin charge of £25.00 is added after all other additions. This is supported by Document A. How is the gross premium calculated from the net premium? 47. From the evidence of the respondent in the main part of the hearing, we find that the sequence of additions is as follows: Net premium Commission added Insurance premium tax added Admin fee added Gross Premium payable What roles are undertaken by the [NAME] and the [NAME] agent for these commissions? 48. From Document C, the [NAME] explains their roles and the addition of 25% commission to the net premium. The roles being (i) standard [NAME] function of identifying appropriate insurance (25%) (ii) full claims delegated authority, authorised to deal with property owners claims, in their entirety including

9 payment , for claims up to £10,000, this covers cost of staffing handling (5%) (iii) underwriting delegated authority and system upkeep, authorised to underwrite blocks of flats risks within certain criteria of under writing guide, this includes document issue, risk profiling and premium calculation (5%). This figure is shared between the [NAME] who have 15% and 10% are the [NAME] shares. Additionally, a further 5% is for full claims authority dealing with property owners claims through to payment. In addition, a further 5% underwriting delegated authority, includes document issue risk profiling, and premium calculation. Analysis and Determination 50. [NAME] requested detailed makeup of the 2024 commissions about how the respective commission figures of £8,238.46, for the [NAME] and £5,128.11 for the [NAME] agent are calculated. The Tribunal has instead received detailed analysis of how two other commissions, that of £6,678.35 and £5,057.84 are derived.

51. The purpose of [NAME] was to understand the respondent’s formulation of commission and allow the applicant a chance to comment.

52. Whilst details of the figures and hence year specified in [NAME] were not provided by the respondent in their submissions, the year which was provided showed the mechanics of the respondent's commission calculation. The applicant having the opportunity see and comment on this.

53. The Tribunal examines the details of the year provided in order to understand the respondents approach to commission.

54. The Tribunal has therefore had recourse to copies of the actual insurance documents supplied by the respondent in their supplemental evidence of February 2026.

55. The [NAME] in Document B and F sets out the key figures for the insurance year from 1 October 2024.

56. The applicant says in paragraph 4 of their applicant’s Reply to respondent’s Statement, that it is flawed to apply commission to a gross premium. The Tribunal agrees that such an approach would be flawed. The Tribunal considers the only rational approach would be the identification of the net premium and then additions made to that. The Tribunal in consideration of Document A, the [NAME] explanation, considers this to be an analysis of figures rather than an indication on how the premium is calculated.

57. The Tribunal refers to its finding above and sets out to deconstruct the insurance premium for the premium payable for 12 months from 1October 2024 in accordance with its findings. Total premium for year of policy 1.10.24 is £ 38,498.34 Less admin fee £ 25.00

10 Subtotal £ 38,473.34

Deduct IPT (12%) divide by 1.12 Net of insurance premium tax £ 34,351.95 Deduct commission £ 11,796.13 Net premium is £ 22,555.06 58. From the figures above it can be seen that [NAME] received £6,678.35 which is equivalent of 29.60% of the net premium, and [NAME] received £5,057.84 which is the equivalent of 22.42% of the net premium.

59. Arithmetically therefore the total commission as a percentage of net premium is 52%.

60. The Tribunal has heard what the respective functions the [NAME] [NAME] and the [NAME] agent [NAME] perform for these commissions. [NAME]. These are; for the [NAME] agent sourcing a [NAME] and securing insurance. [NAME] “A. [NAME] (Duties and Responsibilities) “(i) placement and renewal of the insurance policy, Obtaining quotes from [NAME] on available insurance products Arranging placement of the policy with the selected [NAME] policy documentation and renewal documentation (ii) underwriting delegated authority, Undertaking underwriting activities within the scope of delegated authority by the [NAME] profiling and assessment within agreed underwriting parameters Premium calculation in accordance with agreed underwriting criteria Producing policy documentation under delegated arrangements (iii) claims handling delegated authority Handling and administering claims within delegated authority limits Liasing with policy holders, manging [NAME], and [NAME] in relation to claims

11 [NAME] the process of claims and arranging payments where authorised Maintaining claims records and reporting to the [NAME] as required (iv) administrative and compliance functions. Producing disclosure documentation for [NAME] regulatory compliance including remuneration disclosure Acting as an intermediatory between [NAME] and policy holder. B.[NAME] (Duties and Responibilities) (i) [NAME] and property administration Acting as day-to-day point of contact for [NAME] [NAME] service charge arrangements through which insurance costs are recovered Coordinating insurance documentation distribution where appropriate (e.g. sharing disclosure docs) Obtaining clients authority to renew, answering queries to Directors, and to lessees ref shared documents. (ii) Insurance coordination Providing property information required for insurance placement Liasing with the [NAME] regarding renewal details and building risk information Assisting with implementation of [NAME] requirements or risk improvements 3. Claims and emergency support Acting as on-site liaison for insurance claims. Facilitating access, documentation and communication between residents, contractors, [NAME] and [NAME]. Assisting with practical administration related to claims at the property. Providing a [NAME] for properties under management, enabling urgent issues to be reported and dealt with promptly, including matters which may give rise to insurance claims. C. Relationship between the roles The [NAME] acts as the specialist intermediary responsible for arranging and administering the insurance and for carrying out delegated authority functions. The [NAME] agent performs property management and operational functions connected with the building and [NAME] communication, including emergency response arrangements.

12 Both roles contribute to the administration and operation of the insurance arrangements but perform different functions within the distribution chain.”

61. The Tribunal has heard evidence from the respondent that the building has a history of extensive claims which require considerable work to address.

62. The Tribunal heard that the applicant no longer relies on the FCA guidelines that suggested a range between 10 and 30% commission was reasonable. The applicant provides no alternative figure or basis of figure.

63. The only matter for the Tribunal to determine is that which was set aside in the Upper Tribunal’s decision that is in paragraph 10, “the [NAME] decision is set aside only to the extent that it concerns insurance commission and consequential orders relating to the costs incurred by the respondent in the proceedings.” 64. So, the question is whether the costs incurred by the [NAME] by way of service charge in respect of the insurance commissions paid are reasonable under section 27 A, Landlord and Tenant Act 1985.

65. The respondent says they are reasonable, the applicant says they are not but does not suggest an alternative figure and has withdrawn his position guided by the FCA policy which was total commission should remain in a range of 10 to 30% 66. The Tribunal has heard evidence from the respondent that this block has proved difficult to insure and that it has an extensive claims history. The Tribunal has heard of the relative roles undertaken by the [NAME] agent and the [NAME]. The specific figures are £6678.35 for the [NAME], and £5057.84 for the [NAME] agent.

67. In the absence of alternative figures, and the Tribunal has had recourse to the evidence of roles and, nature, size, and history of the block.

68. The Tribunal finds the majority of responsibilities between the [NAME] and the [NAME] agent, are held by the [NAME] and leaves the commission figure attributed to the [NAME] undisturbed. The [NAME] agent has placed insurance with the same [NAME] since 2019, and a large swath of insurance related tasks have passed to the [NAME]. Additionally, some of the tasks remaining fall into the area anticipated to be

13 covered by the [NAME] agent’s management fee, for example the [NAME]. The [NAME] agent is already remunerated for some of these tasks through the normal expectations of management and the fee so charged. The Tribunal reviewing the duties the [NAME] agent provides in respect of insurance, considering the same [NAME] has been used since 2019 which should lessen the task and the claims history of the building has been challenging which will increase the task, the tribunal determines a figure of £2,528.92 is reasonable.

69. So for the year 12 months from 1 October 2024 instead of a gross premium of £38,498.34 the premium allowable is £35,969.42. The Applicants share of this is set out at 1.764% The Tribunal has had recourse to the table in the respondent’s [NAME] and added the last two columns. [COMPANY] [NAME] Un- altered Flat 48 1.764% [NAME] 50% [NAME] 48 1.764% 19 16121.77 2914.02 51.40 2808.80 1404.40 24.77 20 20964.89 5731.17 101.10 2692.22 1346.11 23.74 21 22117.95 5628.22 99.28 3258.46 1629.23 28.74 22 24329.75 5702.29 100.59 4073.06 2036.53 35.92 23 30437.19 7388.53 130.33 4830.65 2415.32 42.60 24 36093.86 8233.46 145.33 5128.11 2564.05 45.22

70. The Applicant challenged years ending 23 June 2019 to 23 June 2024 inclusive, the determination in respect of these for the commission payable for the [NAME] agent is set out below. The commission payable for the [NAME] is unaltered. Year 2019 2020 2021 2022 2023 2024 £ 24.77 23.74 28.74 35.92 42.60 45.22

Application under s.20C Landlord and Tenant Act 1985 and Paragraph 5A of Schedule 11 Commonhold and Leasehold Reform Act 2002.

71. In the application form the applicant applied for an order under section 20C of the Landlord and Tenant Act 1985 Act. Such an order may reduce such costs incurred by the landlord in the proceedings being levied in the service charge payable by the tenant or any other person specified in the section 20C application. Additionally, an application was made under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002. Such an application may reduce or extinguishes the tenant’s liability to pay an administration charge.

14

72. The tribunal grants an order in respect of both headings; section 20C and paragraph 5A for the cost of proceedings incurred from the point of the application for permission to appeal by the applicant to this determination.