Last edited 01 Aug 2017

Peppercorn rent

The term ‘leasehold’ in property law describes a lease from the freeholder of a property that enables the leaseholder to use the property for a specified period subject to conditions set out in the lease in return for the payment of rent. At the end of the lease the premises revert to the freeholder.

Generally, in order for a lease to be enforceable, a ground rent (valuable consideration) is paid by the leaseholder to the landlord. However, historically, as the amounts payable were typically very small, some freeholders asked for peppercorns rather than money, with a phrase in the lease such as, ‘...a yearly rent of one peppercorn, if demanded’, effectively meaning that there was nothing to collect.

This has given rise to the term ‘peppercorn lease’. The phrase is now also used more generally to mean an amount that is small or insignificant, for example a ‘peppercorn payment’ for the sale of something that has little monetary value.

Ground rent is still charged by landlords, and is a condition of most leases. Ground rent is usually a small amount, typically £50 to £300 a year. If the amount is very small, or notional, it may be described as a peppercorn rent.

If a leaseholder extends a lease under the Leasehold Reform, Housing and Urban Development Act 1993 they then only have to pay a ‘peppercorn rent’, effectively a ground rent of nothing. If a lease is extended by negotiation however, ground rent may still be payable.