Peppercorn rent
Peppercorn rent is a token or nominal rent, often literally stated as “one peppercorn per year, if demanded”, used mainly in long lease contracts. In practice it means no real rent is payable. The payment is symbolic, to keep the lease legally valid, rather than to generate rental income.
For landlord’s, peppercorn rent appears in two main contexts:
Long leases and ground rent reform – New long residential leases in England and Wales are increasingly required, under leasehold reform, to have ground rent reduced to a peppercorn, so you cannot charge ongoing ground rent beyond that nominal amount.
Intra-group or family arrangements – Property may sometimes be leased at a peppercorn where the economic return comes from elsewhere. For example, service charges or commercial arrangements, not the rent itself.
Peppercorn rent does not reduce a leaseholder’s other obligations, including service charges, repair contributions, insurance and compliance with covenants still apply. For the private renting sector and the Renters’ Rights Act, peppercorn rent mainly matters in the background leasehold structure of flats and estates, where your income as a superior landlord may come from service charges rather than ground rent.
