Andrew Mountbatten-Windsor’s Royal Lodge cottage subletting offered ‘best value for money’, MPs told

The Crown Estate has defended the initial terms of Andrew Mountbatten-Windsor’s Royal Lodge lease, telling MPs that arrangements allowing him to sublet properties offered “best value” at the time they were established.

This defence comes as the Crown Estate’s chief executive faced a Commons committee hearing on Monday, where questions were raised about the royal’s former accommodation.

Last month, a National Audit Office investigation revealed that the late Queen’s second son received an undisclosed private income from subletting three cottages on his Royal Lodge estate for over two decades, while paying only a peppercorn rent.

These payments came to light after Andrew, who was stripped of his titles over his links to paedophile Jeffrey Epstein, was compelled to vacate his home.

He has since moved to Marsh Farm on the King’s Sandringham estate in Norfolk, following significant public outcry regarding the favourable rent he had been paying.

The leasehold agreement

His leasehold agreement revealed he paid £1 million for the lease and that since then he paid “one peppercorn” of rent “if demanded” per year.

He was also required to pay a further £7.5 million for refurbishments completed in 2005.

Dan Labbad, chief executive of the Crown Estate, told the Public Accounts Committee (PAC): “In the case of Royal Lodge, the £7.5 million in refurbishment costs, we were able to then take that money that we would otherwise have to spend, and invest in other things.”

He added of the subletting: “Those potential income streams were taken into account in determining what best value was at the time.”

The evidence session was held as part of the PAC’s inquiry into the management and governance of the Crown Estate and associated properties.

Mr Labbad insisted subletting was “reasonably common” in the property industry for long leaseholds, and an independent valuation was undertaken during the governance process when Andrew took over the estate’s lease more than 20 years ago, with the potential income from subletting taken into account.

“The governance process that led to the arrangements at Royal Lodge in 2003 was such that a whole range of things were looked at – the premium, the refurbishment needs that would have otherwise been a Crown Estate cost, and a whole host of other elements…” Mr Labbad said.

“Within that, subleasing of the cottages was part of the independent valuation that informed both the consideration and the value for money requirements being satisfied.”

The amount Andrew made from subletting

Mr Labbad was questioned on how much Andrew made from the subletting, but he said he did not have that information, and that it was a matter for the former duke as the tenant.

But James Chalmers, the King’s keeper of the privy purse and treasurer who was also appearing as a witness, suggested the royal household would be able to obtain the figure.

Mr Chalmers said: “What I can say is the role we played with the NAO report, which we can play here, was we gathered the information from the other households, and I believe if the request were made for that information, we could provide it to the National Audit Office and therefore to the committee … We can get it.”

Chairman of the PAC Sir Geoffrey Clifton-Brown told Mr Chalmers it could be arranged for the royal household to provide the amount in confidence to the NAO if they did not want the figure to be “more widely shared”.

Other findings – including Princess Beatrice and Princess Eugenie’s accommodation

Other findings by the NAO, the public spending watchdog, included the revelation that the King foots the bill for Princess Beatrice and Princess Eugenie’s accommodation in royal palaces despite both Andrew’s daughters being non-working royals.

And for a number of years, their adjusted rents – reduced because the royal household properties require tenants with security clearance – were based on out-of-date open market valuations.

Up until this year, Eugenie’s rent of Ivy Cottage at Kensington Palace was based on a 2018 valuation and Beatrice’s apartment in St James’s Palace on a 2020 valuation.

Eugenie’s rent was 50% of the 2018 open market value from 2020 to 2021, and ranged from 55% in 2022 to 63% in 2025, while rent on Beatrice’s was 60% of the 2020 market value from 2020-2021 and ranged from 62% to 68% between 2022-2025, the NAO said.

The current rental rates are now 64% of a 2026 open market valuation for Eugenie, and 68% of a 2026 valuation for Beatrice.

Mr Chalmers told the committee that the royal household had to be “very, very careful” who they allowed to live in “very sensitive” parts of the occupied royal palaces.

The household has 255 properties across the palaces including at Buckingham Palace, Windsor Castle, Kensington Palace and James’s Palace, with 216 behind the security cordon, with most of these occupied by staff, as well as 12 other tenants.

Mr Chalmers said the household charged rent to the 12 tenants based on an adjusted market value because of the “limited number of potential tenants, but also that we want to get the best value for money we can for the taxpayer”.

“What’s the supply of people with the right security clearance that we would feel comfortable? And I should say that within some of these areas (are) very sensitive locations, and we need to be very, very careful who we’re putting where,” Mr Chalmers said.

He added: “We don’t want to get ourselves into a position where we start charging more, or try to charge more, and then find that people leave the palaces and actually it’ll hurt the public purse, so it’s a balance.”

Mr Chalmers said that although some market valuations had previously been out of date, they had been increasing the rents year on year to a rate “slightly above the rate at which the market had moved”.

He said he expected the household to react and reflect on the NAO’s scrutiny, and look at its valuation policy.

But he said suggested valuations might be carried out every five or six years, because to do so every year would not offer value for money.