Why freeholders and others complicit in the secret home insurance commissions scandal must watch the car finance Supreme Court case

The millions of flat-leaseholders fearing they have lost thousands of pounds to third-party landlords, or freeholders, in secret commissions on buildings insurance cannot afford to ignore the car finance case that reached the Supreme Court last month.

In an attempt to formalise leaseholders’ legal position on secret commissions, Free Leaseholders applied to intervene in Johnson v FirstRand [2025] UKSC 18, known as the MotoNovo Finance case. It was on appeal from the Court of Appeal’s 2024 ruling that finance customers had not given their fully informed consent to their dealers to make a commission at their expense. 

The parallels with leasehold are inescapable. Free Leaseholders, with Francis Tregear KC of XXIV Old Buildings, argued that leaseholders are in an even worse position than car finance customers. Leaseholders are captive consumers, unable to strike the best deal since they are dependent on a landlord to buy their insurance policy. Quoting Arnold v Britton [2015] UKSC 36, Tregear KC reminded the Court:

“Long residential leases are an exceptional species of contract ... in no other context is a private individual expected to enter into a financial commitment extending for the rest of his or her life.”

Although the Supreme Court declined to hear our intervention, as it did with the Chancellor’s attempt, the KC’s submission for Free Leaseholders is compelling and available on our website. Leaseholders are financial hostages. Bound by long-term contracts, they must pay for services they cannot choose or escape. Attempts to challenge these are directed to tribunals that nominally offer remedy but consistently ignore core financial abuses. Imagine being forced to buy insurance from a provider chosen by your adversary, with no visibility on costs or commissions. That is the leasehold model governing flat-living, which makes England and Wales outliers in the world.  

Weak enforcement and complex financial arrangements allow freeholders, insurers, brokers and managing agents to collude in order to defraud the leaseholder. Secret commissions flourish because leaseholders lack control and accountability is elusive.

At common law, the principal would not expect their fiduciary agent, who has a duty of loyalty to them, to put themselves in a conflict of interest position and take a secret commission. However, this is what’s happening with leasehold buildings insurance. The leaseholder, as the principal, is often victim to their freeholder, the fiduciary agent, who self-deals to inflate insurance costs with secret commission, maybe by as much as 60 per cent of the premium and, crucially, without obtaining the leaseholder’s fully informed consent.

Leaseholders face two-tier justice when trying to litigate on this issue. Using the courts system – where arguments about secret commissions, corrupt fiduciaries and the tort of bribery are more likely to land than at the property tribunal, but more risky financially since you could be personally liable for the other side’s legal costs if you lose – is unfortunately only for the bravest or most affluent of leaseholders.

By contrast, the tribunal usually shies away from confronting fiduciary and ethical breaches, citing its limited jurisdiction and hiding behind leasehold law’s pro-landlord “reasonableness” test. This timidity is baffling. Even when leaseholders’ common law right as principal is supported by the existence of a statutory trust (imposed under section 42 of the Landlord and Tenant Act 1987) with a landlord holding their monies as a trustee, tribunals are notorious for averting their gaze from freeholder fiduciary duties owed to the leaseholders when placing insurance for the block. The reasonableness test should not operate in a vacuum to the exclusion of the common law, but it often does at tribunal, favouring the wrongdoers.  

In a case that Free Leaseholders supported, the upper tribunal overturned a first-tier tribunal decision that had disallowed a £1.6 million commission to a landlord-related company. The leaseholders never consented to these fees, only discovering them during this gruelling five-year tribunal battle. The upper tribunal permitted over half a million pounds of the commission to go back to the landlord despite no contract between the FCA-regulated broker and the landlord-related company having been presented. Further, it was heard that the landlord-related company had an accountant on a charge-out rate of £525 an hour, so £3,675 for a seven-hour day, something which an FTT panel member, a KC no less, gasped at. The FTT initially refused to grant disclosure, branding the leaseholders’ application a “fishing expedition”. 

The MotoNovo Finance case rests on a core principle: that secret commissions paid to influence decision-makers constitute actionable bribery against the briber. The Court of Appeal confirmed that even without a direct contractual relationship, such payments can be challenged as bribes. Why? Because bribes distort judgment and compromise trust. 

Yet when it comes to secret commission challenges before the FTT, case after case the tribunal’s refusal to treat secret commissions as kickbacks exposes its institutional blind spot. What the Court of Appeal would call corruption, the tribunal reduces to a pricing exercise.

The leasehold parallel is clear: insurers or brokers – acting as bribers – pay freeholders or managing agents to win business. Leaseholders, the ones paying, remain in the dark. 

At the Supreme Court in the MotoNovo Finance case last month, Jemima Stratford KC, for the FCA, warned:

“The Court of Appeal’s approach to fiduciary duties may fairly be characterised as a sweeping one ... difficult to draw the line between what the Court said about motor dealer brokers ... and the role of other intermediaries and brokers.”

The FCA was right to highlight the case’s wider implications. But its position is morally thin. In 2005, its predecessor the FSA registered concern in an internal report that freeholders and managing agents inflated premiums to enrich themselves at the expense of captive leaseholders. It did nothing.

For two decades, regulators failed to act. Only political pressure brought token responses. Meanwhile, leaseholders continue to be looted. 

If tribunals won’t enforce common law, and regulators remain inert, then Parliament must act. The Supreme Court’s ruling in MotoNovo is expected in July. Free Leaseholders anticipates it will affirm that secret commissions without informed consent of the principal are legally and morally indefensible.

But even a favourable MotoNovo ruling won’t fix the leasehold scandal of secret insurance commissions. 

Leaseholders must be empowered to place their buildings insurance, as flat-owners do the world over. This requires the government to use the forthcoming Leasehold and Commonhold Reform Bill to go beyond the Law Commission recommendations of half a decade ago and further liberalise qualifying criteria on Right to Manage and collective enfranchisement. Secret commissions should be banned and not rebadged as a “Permitted Insurance Payment” under the Leasehold and Freehold Reform Act 2024. The government wants to call this “Permitted Insurance Fees” and will define the policy under secondary legislation, according to a public consultation that closed in February. Legitimising this income stream as a new service charge item risks emboldening freeholders and managing agents to keep ripping leaseholders off under the guise of providing insurance “services”.

Instead, what the government should be doing is codifying and enforcing fiduciary obligations by establishing statutory fiduciary duties for freeholders, building-landlords, insurers, brokers, and managing agents – and empowering tribunals to apply them with remedies such as restitution and account of profits. 

As Lord Reed remarked in the MotoNovo hearing:

“If you know that somebody is acting as the agent for a principal and … you make a payment to your agent, that’s dishonest.”

That dishonesty defines leasehold buildings insurance. The FCA ignored it. The tribunals excuse it. Now Parliament must end it.

Harry Scoffin, Founder, Free Leaseholders