1. Landlord acquires property
  2. Landlord’s Managing Agent arranges insurance cover through preferred Insurance Broker. Residents Association is Co-Insured
  3. Lease allows Landlord to recover insurance premium from Tenant as premium is reserved as additional rent
  4.  Insurer pays commission to Broker (Broker usually shares commission with Landlord or Managing Agent)
  5.  Undisclosed commission creates a secret profit against Tenant who is Co-Insured under the insurance policy
  6. Broker has an obligation to disclose commission arrangements to Tenant 
  7. Tenant is potentially entitled to recover up to six years of commission payments from Broker
Case Study
Insurance Audit – Portfolio of Residential Properties

Residents Association instructed M2 to negotiate the insurance premiums arranged by the Landlords preferred Broker.  The Lease for the portfolio of residential properties allowed the interests of the Residents Association to be noted as Co-Insured on the Landlord’s policy.

M2 achieved a significant reduction in insurance costs for the Residents Association and also established that the Landlords Broker had entered into a commission sharing arrangement therefore creating a secret profit.

The Broker had a duty of care to disclose the arrangement on the basis that the Residents Association were Co-Insured.  Following this disclosure the Residents Association had the ability to recover these payments retrospectively.