Secret commissions are being paid to property agents behind leaseholders’ backs, with undisclosed payments from insurance brokers said to run into “hundreds of millions of pounds”.Sir Peter
Bottomley, a Conservative MP and co-chairman of a parliamentary group looking into leasehold reform, warned that both private and commercial tenants were losing out to the practice, in which insurance brokers pay secret fees to managing agents when buildings insurance is renewed.Neil Holloway, a specialist in the recovery of what he calls “secret insurance commissions”, said that such payments were widespread in the commercial property sector, but that residential leaseholders were also victims.He said that tenants were being charged “inflated” insurance premiums to cover the commissions and were exposed to conflicts of interest since they may end up with less suitable insurance. Undisclosed payments were often subsidising less profitable activities within agents’ businesses, he said.He estimated that “millions if not billions” of pounds was being paid to “unscrupulous managing agents and landlords every year without the knowledge of those they are acting on behalf of”.While landlords sometimes share the secret commission at the expense of leaseholders, often property owners are unaware of the practice, Mr Holloway said.Sir Peter, 74, said that secret commissions were part of a broader pattern of mistreatment of leaseholders. “Those receiving cowboy commissions by ripping off leaseholders in order to secure the landlords’ insurance business will be brought to account,” he said.Mr Holloway, 61, founder of M2 Recovery, said that the practice may constitute an illegal bribe and, as such, secret commissions going as far back as six years could be recovered if agents were challenged. M2 has secured refunds worth hundreds of thousands of pounds on behalf of clients, including a banking group and a high street retail chain, Mr Holloway said.

“Agents are not being transparent and are being influenced by insurance brokers to push tenants into situations that may not be best for them,” he said.Nigel Glen, chief executive of the Association of Residential Managing Agents, a trade and self-regulatory body, said that his members must disclose if they are taking a commission from brokers and that “best practice” is to tell leaseholders how much.He said that he believed the payment of undisclosed commissions was more widespread in the commercial sector, but he called for formal regulation to ensure that the two thirds of managing agents that Arma did not cover were brought into line.Jonathan Gorvin, head of regulatory policy and development at the Royal Institution of Chartered Surveyors, whose members include commercial agents, said: “Under our scheme, firms must account to clients for any commission they receive from insurance work and therefore an undisclosed payment should not occur under any rules.“Where we find failures, we take disciplinary action. This would include removing firms from registration.”A spokeswoman for the British Insurance Brokers’ Association, said: “The insurance contract arranged by the broker is between the property owner and the insurance company.” She insisted that payments to agents were “not secret” as far as brokers were concerned “and are appropriately accounted for”.