A lease might not specify that costs, such as service charges and insurance premiums, which a landlord seeks to recover from tenants must be "reasonable" costs, but if it requires that the costs must be "reasonably incurred" then it means the same thing. Costs that must be "reasonably incurred" must also be at a reasonable level.

Cos Services Limited v Nicholson and Willans [2017] related to insurance premiums that a landlord sought to recover from its tenants in a residential building. The premiums ranged from £12,500 to £13,500 p.a. over a three year period. The landlord insured under a block policy as it owned other properties. The tenants objected and provided evidence that if their building were insured under a separate policy then the premiums, for similar cover, would have ranged from only £2,800 to £3,000 p.a. The tenants argued that although the lease did not require the premium to be "reasonable", the Landlord and Tenant Act 1985 does provide that costs (including insurance premiums) under residential leases must be "reasonably incurred" and that this did not only mean that the landlord had to negotiate the insurance terms in the open market, but that the amount of the premium must itself be reasonable. The Upper Tribunal agreed.

Although this case decides what "reasonably incurred" means for the purposes of the Landlord and Tenant Act 1985 and residential leases, the same principle ought to apply to commercial leases where the drafting requires costs to be "reasonably incurred". It is therefore advisable to avoid "reasonably incurred" and use "properly incurred" where possible. "Properly incurred" under a different case has been held not to require that the cost itself must be reasonable; only that the cost is consistent with, and was negotiated freely in, the market.