how does a peppercorn rent work

vertarama

Im looking to buy a property, the property consists of 2 lockup shops which bring in an annual rent, above the shops is a self contained flat that is let at a peppercorn rent, i would be grateful if someone could tell me what does this mean?

EdInvestor

A peppercorn rent is a very low, more or less negligible rent, such as 100 quid a year or less. The term is usally used with a flat where a long lease has been sold to an owner occupier.The peppercorn rent is payable to the freeholder of the whole building. Valuation of such freeholds is quite a specialised art.

silvercar

Letting at a peppercorn rent is usually for the purpose of showing that you are a leaseholder and precluding any claim to own the property.

vertarama

silvercar wrote:

Letting at a peppercorn rent is usually for the purpose of showing that you are a leaseholder and precluding any claim to own the property.

so if i buy this property am i stuck with the tennent and the peppercorn rent for the duration of the 125 year agreement, or can this be changed?

silvercar

vertarama wrote:

so if i buy this property am i stuck with the tennent and the peppercorn rent for the duration of the 125 year agreement, or can this be changed?

depends on the wording of the tennancy if you can increase the rent or end the agreement with appropriate notice! May be that terms of the lease allow the leaseholder of the shop the right to lease the flat for a peppercorn rent.

cattie

vertarama wrote:

so if i buy this property am i stuck with the tennent and the peppercorn rent for the duration of the 125 year agreement, or can this be changed?

Oh, that's not a nice way to describe somebody who could well have paid out a couple of hundred thousand or more for their leasehold flat.

A peppercorn rent is just that, very nominal, often in the region of £10 per year & generally fixed for the duration of the lease. It is usually termed as ground rent.

A lease is legally binding & cannot be changed to benefit the freeholder I'm afraid.

If the tenant of the flat is just that, a rental tenant & not a leaseholder then things may be a bit different.

EdInvestor

How old is the lease (assuming a lease has been created and sold off?) If it is getting down to less than 80 years remaining, you may be able to make some money by charging a fee to the tenant(leaseholder) for a lease extension. There are rules governing charges for this, see here:

https://www.lease-advice.org.uk

You really need to look at the provisions of the lease on the flat.Another way freeholders may be able to make money is by charging leaseholders if they want to rent out their flat to a tenant on a short lease and need the freeholder's permission.Some leases require this.

If the lease on the flat is connected to the leases on the shops, you may be able to split them and then create a new leasehold on the flat.This may cost you of course.

These moneymaking possibilities (or lack of them) should be reflected in the price of the freehold.

F_T_Buyer

http://en.wikipedia.org/wiki/Peppercorn_rent

clutton_2

some types of tenancy agreement do not allow any rent increaases at all, and can be passed on to the heirs of the current occupant/tenant at the same low rent - be Very sure that you are not buying one of these !!!!!