This week, it was announced that there will be an inquiry by the Public Accounts Committee (PAC) into the Crown Estate —the business that owns a vast £15 billion portfolio of land and property— and its leases on properties to members of the royal family.
Now other royal living arrangements have been thrust into the spotlight, too, with questions arising over the homes of royals including Prince Edward and Princess Alexandra.
Here’s your guide to peppercorn rent – and the royals who benefit from similar arrangements.
What is “peppercorn” rent?
“Peppercorn rent is a symbolic rent, most commonly charged at £1 a year, which is used to legally formalise a lease without expecting a commercial rental payment,” explains Alex King, founder of finance platform Generation Money.
“In practice, the sum is so small that the financial focus is not the payment itself but covering the costs of the wider responsibilities that come with the lease, which includes upkeep, renovations and usually security arrangements.”
The arrangement allows the Crown Estate to retain the freehold while leasing the property out. In exchange, the tenant is usually required to pay for maintenance or refurbishments.
“The costs of these can often far exceed the rent itself,” says King. “In many cases, the maintenance and upkeep costs probably also exceed the rent that would be paid under a commercial agreement instead of a peppercorn.”
The Crown Estate is required to secure “the best consideration in money or money’s worth which in their opinion can reasonably be obtained”.
This is in the public interest because the Crown Estate returns its net profit to the HM Treasury, having generated £5 billion over the past decade. Any reduced lease income, including from properties like Royal Lodge, reduces the amount that goes back into the public purse.
Despite the outrage surrounding Andrew’s peppercorn lease, though, such arrangements are reasonably common.
“Token consideration is a feature of English law,” says Bryan Johnston, property disputes partner at Dentons. “It is common to see consideration of £1 in commercial contracts where parties perform obligations to one another and the consideration is required to make their agreement legally binding.”
Peppercorn rents can be used for community buildings, church land, heritage sites, or by NGOs, charities, local authorities or trusts which wish to retain ownership of a property without seeking commercial rent from the tenants. “It’s a long-established legal mechanism which isn’t unique to the royal family,” says King.
Nor is it always a peppercorn. The City of London rents two pieces of land from the Crown for two knives, six giant horseshoes and 61 nails, while the Covent Garden Area Trust pays an annual rent of five red apples and five posies of flowers in exchange for the properties it leases.
Andrew Mountbatten Windsor: Royal Lodge
Andrew paid a peppercorn rent for the 30-room lodge, valued at an estimated £30 million
ES Composite
Andrew paid £1 million for a 75-year lease on Royal Lodge in 2003, plus £7.5 million in refurbishments in 2005, allowing him to pay a “peppercorn rent” while living there, despite the property being valued at an estimated £30 million.
Although Andrew received payments from the public purse for his work as a royal between 1978 and 2010, there have long been questions about how the renovation was funded – as well as how he has been able to pay for the upkeep of the house in recent years, given that his only known income is a modest £20,000-a-year navy pension.
Before Andrew took on the lease for Royal Lodge, the Crown Estate had considered turning it into a “grace and favour” residence, which would mean that the tenant would not pay any rent, and that the Crown Estate would have to foot the refurbishment bill. Andrew’s lease and renovation payment was considered a more favourable option.
The then-prince paid for a “comprehensive scheme of renovation” which had to be completed within two years and checked by an independent architect.
The Grade II-listed Royal Lodge sits within 40 hectares of grounds and boasts a chapel lodge, six cottages, a gardener’s cottage, security accommodation and, reportedly, a host of leisure features: a pool, golf driving range, tennis courts.
Throughout his two decades at the property, Andrew was required to “repair, renew, uphold, clean and keep in repair and where necessary rebuild or (in the case of fixtures and fittings beyond economic repair) replace the Premises”, as well as keeping the gardens, orchard and surrounding woodland in good order.
Yet now that Andrew is moving out, it appears that some corners may have been cut on maintenance, with reports of roof damage, peeling paintwork and black mould on the exterior of the building.
Royal Lodge was inspected by the Crown Estate on 12 November, who confirmed that: “while the extent of end of tenancy dilapidations and repairs required are not out of keeping with a tenancy of this duration, they will mean in all likelihood that Andrew Mountbatten-Windsor will not be owed any compensation for early surrender of the lease.”
For Andrew, this compensation would have amounted to £488,342.21.
The PAC inquiry will investigate the former prince’s lease arrangements for the building, having already made enquiries with the Crown Estate.
“There is considerable and understandable public interest in the spending of public money in relation to Prince Andrew, which in part stems from the fact that he is no longer a working Royal and from serious and disturbing allegations made against him,” wrote MP Sir Geoffrey Clifton-Brown, who is chair of the PAC. Andrew Mountbatten Windsor has always vehemently denied any wrongdoing.
“The Committee seek assurance that the rationale for the lease justifies the minimal rent charged.”
In response, the Crown Estate published a briefing which revealed the complexities of royals’ lease arrangements.
“Having reflected on what we have received, the information provided clearly forms the beginnings of a basis for an inquiry,” said Clifton-Brown. This will take place in the new year.
Royal Lodge will form the focus of the PAC inquiry, but it is not the only royal property with an alternative rental arrangement.
Price Edward and Sophie, Duchess of Edinburgh: Mansion House, Bagshot Park
Edward and Sophie
PA Wire
Mansion Housea Grade II-listed Victorian building, is set within 21 hectares of Windsor Great Park.
Built for Queen Victoria’s third son and his wife, it is rumoured to be worth £30 million, with 120 rooms. It also includes a block of stables and a property called Sunningdale Lodge.
For more than 25 years, it has been home to Prince Edward, the Queen’s youngest son, who signed a lease on the property in 1998. He lives with his wife Sophie, Duchess of Edinburgh, and their two children.
Edward agreed to pay £1.38 million for a restoration of the building, which had been damaged by its previous use as the Ministry of Defence’s Army Chaplains Department. The Crown Estate, which had received some money from the MoD, would contribute an additional £1.6 million.
Long Walk, Windsor Great Park
Daniel Lynch
Under his 50-year lease, Edward would pay an initial rent of £5,000 per year until the refurbishment was complete, and £90,000 a year thereafter. Every 15 years, the rent would be subject to review.
In 2007, though, Edward renegotiated the lease, extending it to 150 years for a cost of £5 million.
Princess Alexandra: Thatched House Lodge, Richmond Park
Princess Alexandra
PA Archive
This Grade II-listed Regency house has been Queen Elizabeth II’s first cousin Princess Alexandra’s home since 1963. Set in 1.6 hectares of land within Richmond Park, it has stabling, a cottage, garage and summerhouse.
In 1971, she paid £3,000 for a 70-year lease, plus a rent of £410 per year for the first 35 years, rising to £700 afterwards.
Alexandra negotiated a separate 150-year lease in 1995 (valid from 1994), for which she paid a £670,000 premium and a rent of £1,000 a year for the first 25 years, rising incrementally every 25 years up to the value of £6,000.
Both leases require the princess to keep the property in “good and substantial repair” and to preserve its character.
Alexandra’s daughter, Marina Ogilvy, has a short-term tenancy agreement for a three-bedroom cottage in Windsor Great Park. She rents at market value, without any special conditions.
Robert Smith / Wikipedia
Andrew Mountbatten Windsor: Sunninghill Park, Ascot
In 1987, the land, which had been a tree nursery, was leased to a company belonging to Queen Elizabeth for 125 years, for which it paid £100,000 and an annual rent of £100, rising to £1,600.
Two years later, the company gained planning permission to build a detached, 12-bedroom house on the land, which was given to Andrew as a wedding gift from the Queen. He moved in with his new wife, Sarah Ferguson.
Andrew took out two separate leases on properties called North Lodge and East Lodge in 1996 and 1998, which were for members of staff.
North Lodge has now been returned to the Crown Estate and is let to a third party, while Andrew still holds the lease for East Lodge.
Sunninghill Park
Dee Earley/Wikipedia
In 2003, the freehold of Sunninghill Park was sold for £12,265 to a company called The Trustees of the Sunninghill Park Settlement, which was understood to have been set up for Andrew.
As for Andrew and Fergie’s marital homethis was sold in 2008 for £15 million — a full £3 million more than its asking price— to a Kazakh oligarch, Timur Kulibayev.
Despite paying over the odds for the house, Kulibayev abandoned it, eventually replacing it with a larger, more modern home.
Prince and Princess of Wales: Forest Lodge
A 2001 photo of the entrance hall of Forest Lodge
PA Archive
The Crown Estate’s November briefing revealed that the couple pay “open market rent” for the Grade II-listed Georgian manor, following valuations of the property by Savills and Hamptons.