Can You Buy A Peppercorn Lease?

Can You Buy A Peppercorn Lease?

Can You Buy A Peppercorn Lease?

Yes, you can buy a property that is subject to a peppercorn lease. A peppercorn lease refers to a leasehold agreement where the ground rent is nominal or token, often as little as £1-£10 per year, and is not usually collected in practice.

This type of lease is common in long-term lease agreements, and it serves to maintain a formal landlord-tenant relationship, satisfying the legal requirement of “consideration” in a contract.

When you buy a property with a peppercorn lease, you essentially own the rights to occupy the building, alter and amend it, sell it, or mortgage it, subject to the terms of the lease

While called a “peppercorn lease”, there is often no actual peppercorn paid. It simply means the rent charged is negligible or nominal. So in theory, a leaseholder has to pay the nominal rent if demanded, but in practice peppercorn rents are rarely collected. They represent a token payment that validates the lease.

If you are looking to buy a property with a peppercorn lease, it essentially means no ongoing ground rent is payable. This can make leasehold properties with peppercorn rents more attractive than those with substantial annual ground rents. However, other obligations like service charges could still apply.

When purchasing a leasehold property subject to peppercorn rent, it’s important to check the specific terms. While you may not pay ground rent, there could be clauses allowing review or increase of the nominal rent in future. The length of lease remaining will also impact value.

Buying a peppercorn lease involves similar conveyancing processes to other leaseholds. Your solicitor will review the lease, check any onerous terms, confirm lease length, and ensure the nominal rent is genuinely negligible.

Subject to satisfaction on these aspects, purchasing a peppercorn leasehold can allow avoidance of ground rents.


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