Talk:peppercorn rent

How big is a 'peppercorn rent'?
one might say 'one peppercorn'. But amounts of £10 pa, £50pa or even more are often considered a peppercorn rent, even if they may form the bulk of the value of an asset. A peppercorn rent by definition should be inconsequential.

I would suggest a peppercorn rent would be a rent that is so small as its total value should form a ratio of less than 1:1 of the value of the reversionary interest. Therefore in the example below, rent of £1pa would be a peppercorn on a freehold interest worth £100k at reversion, but £50 would not, since this £50pa would be more valuable than the reversionary interest itself

e.g. a property worth £100k let on a 99y unexpired lease at £50pa

value @5% equivalent yield of a rent of £1pa = 19.84*1 = 19.84 value of £100k receivable in 99y = 0.0079847*100k = 799 total = £820 19.84/799 = <1

value @5% equivalent yield of rent of £50pa = 19.84*50 = 992 value of £100k receivable in 99y = 0.0079847*100k = 799 total = £1791 992/799 = >1

this method would enable the surveyor to decide whether a peppercorn rent really is a peppercorn rent, or whether it should be considered worthwhile in proportion to the size of the interest.


 * Inventing new calculation schemes goes somewhat beyond our remit as a dictionary! Equinox ◑ 21:18, 18 February 2016 (UTC)