Close up of peppercorns

Russell-Cooke’s ingredients: the peppercorn clause

Rebecca McNally, Trainee in the Russell-Cooke Solicitors, private client team.
Rebecca McNally
2 min Read

Current trainee Rebecca McNally reflects back on the beginning of her training contract and her first seat in the real estate team. Rebecca is now in her second seat with the private client team.

I’m three weeks into my first seat in the real estate team at Bedford Row. Russell-Cooke is acting for a client engaged in a long-term development project. A suitably vast and historic plot of land has been acquired, and I’ve been tasked with drafting two licences for short term occupation. 

Planning ahead, we have our eye on the Community Infrastructure Levy (CIL), a charge paid by developers that was introduced by the Planning Act 2008 and the CIL Regulations 2010 (SI 2010/948). Once raised, CIL proceeds are targeted at developing local infrastructure such as roads, educational facilitates, sports and recreation facilitates, medical centres, and flood defences. 

While they wait to break ground, developers can look to reduce their CIL liability by putting some of their land to use for a continuous period of at least six months, and ideally for the benefit of community, hence the licences that the Bedford Row Real Estate team is allowing their resident trainee to have an initial stab at preparing. 

I’ve reached the all-important licence fee clause and am stumped. As a (relatively) recent law student, I was drilled in the essential elements of a valid contract: offer, acceptance, consideration, the intention to create legal relations, and certainty of terms. Without consideration, there is no enforceable agreement. However, if a client is hoping to reduce the CIL payable when they develop the property, charging a fee for six months continued use for the benefit of the community is unlikely to win hearts and minds at the local authority.

"I defer to my supervisor, who calls out like a TV chef with a misplaced confidence in their amateur audience, 'just toss in a peppercorn clause'."
Rebecca McNally • Trainee

A peppercorn clause, or peppercorn rent, is a token rent used to meet the consideration requirement for a legally binding agreement. Peppercorn clauses function on the basis that generally the courts do not concern themselves with whether consideration is adequate. I’m reminded of Chappell & Co Ltd v Nestlé Co Ltd [1960] AC 87, where it was held that seemingly worthless chocolate wrappers, that were discarded by Nestle once received, nonetheless constituted part of the consideration that created a valid contract. 

It’s an archaic but enduring legal device and a little research has revealed some other, equally charming, examples. The National Coastwatch station at St Albans Head rent their building from the Encombe Estate for "one crab per annum if demanded" and the Isles of Scilly Wildlife Trust pay the Duchy of Cornwall a steep rent of one daffodil per year.

Although I am fully anticipating that the client will replace my peppercorn clause with the more contemporary, though far less whimsical, “sum of £1” I cannot resist opting for the wording “a peppercorn if demanded.” I am, after all, sitting in a Grade II listed building on Bedford Row, a stone’s throw from the Inns of Court. It’s easy to imagine a peppercorn rent being charged for the Georgian occupants of these buildings in historic Holborn. 

If you can’t season your drafting with a little whimsy in your very first seat, and in such a setting, when can you? 

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