Peppercorn Ground Rent Definition

If you own a lease or even some houses, by way of a long lease or virtual freehold you are probably required to pay something to the landlord. This payment is sometimes split into three chunks, namely (i) the ground rent, (ii) the insurance premium and (iii) money towards maintenance. Failure to pay any one of these charges can, eventually, lead to serious consequences including the loss of your leasehold interest!

Payments made to the landlord, his managing agent and/or the building’s maintenance fund are set either in the lease or through a mechanism set out in the lease. The ground rent is usually fairly low, perhaps £50 per annum. In many instances, this ground rent may never be demanded or it may be inconsequential.

It’s not unusual for a long lease to have a rent payable equivalent to just one peppercorn! This is merely there to illustrate that something is paid in rent, which is required for a lease to exist. In such cases, the rent (or consideration) is known as a peppercorn rent and will not be demanded by the landlord.

Peppercorn rents are common where long leases exist. They should not be confused with more significant ground rents or sinking funds and insurance rents.

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