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Peppercorn Rents

Posted by Stuart Durrant

23-01-2012

Over the Christmas break I was cornered (rather over aggressively I thought) by a fairly distant relative with the words “you’re a lawyer what’s all this then about peppercorn rents?” Always preferring the quiet life and particularly at Christmas I explained as best I could.

I think the initial confusion is that the words ‘peppercorn rent’ have passed into common parlance to mean very little or a nominal amount, and my enquirer was essentially asking how much that amounted to as a quantified figure.

Generally in English Law almost all a legal contracts require that both sides provide what is called a consideration, which my professors at law school used to conveniently translate to mean something of value. Without consideration there is no binding contract and therefore an agreement without consideration will not be enforced by the courts. The courts are there to enforce agreements, not to adjudicate if a deal is either a good or a bad one for either side. So, if a contract requires one side to give up something of great value, while the other side gives up something of much lesser value, then it is generally still a valid contract.
And here we return to our peppercorn because in order for an essentially one-sided contract to still be valid and enforceable, the contract will usually be written so that one side gives up something of value, while the other side gives a nominal amount such as one pound, or—literally—one peppercorn.
Peppercorn payments are occasionally used for the sale of a struggling company. I have rarely seen this although recently the Comet Group was apparently sold for just £2, presumably this could also have been dealt with by use of a single peppercorn?
I most frequently come across peppercorns (apart from at the dinner table) for their use as the payment of rent or a peppercorn rent in long leases for properties. The most common example would be to have a lease of a flat or house for 999 years and the rent to be one peppercorn. Essentially the landlord is saying that the property is rent free and actually his interest lies in the premium or price for which he is selling the property. Again, this is because, if the owner wants to lease the property, they must charge some, albeit nominal, rent so that the consideration as explained above exists for both parties and creates the legal relationship of landlord and tenant.
I once saw a lease which dismissed the humble peppercorn in favour of “a rose on midsummer’s day” which surely is far more romantic and flamboyant.

Sadly I think there is very little evidence neither of peppercorns or indeed roses being collected or demanded nor being subject to rent arrears actions. I used to live in Kent and I know there Sevenoaks Cricket Club allegedly did pay there peppercorn rent to the Landlords presumably in a fairly ironic, English, ceremonial sort of way. However other than this I am unaware of the collection of such token sums.

So in answer to my original question, a peppercorn rent really is just that – the payment of a peppercorn. Not content with that as my answer and purely for the purposes of research (and not because I had too much time on my hands over Christmas) I did a little calculation. Having purchased a 35 gram jar of peppercorns for £1.47 and extracting fifty five peppercorns – I think a peppercorn rent could mean about 2.67 pence!

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Stuart Durrant

Partner
Head of Residential Property Team

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