Crown Estate claims Andrew Mountbatten-Windsor’s Royal Lodge subletting deal offered 'best value'
The payments emerged after Andrew, who was stripped of his titles over his links to Jeffrey Epstein, was forced to leave Royal Lodge
The Crown Estate has defended the original terms of Andrew Mountbatten-Windsor’s Royal Lodge lease, telling MPs that allowing him to sublet cottages on the estate represented “best value” at the time.
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The issue was raised during a Commons Public Accounts Committee hearing on Monday, where Crown Estate chief executive Dan Labbad was questioned about the former duke’s Windsor home.
Last month, a National Audit Office investigation found that Andrew received an undisclosed private income for more than 20 years from subletting three cottages on the Royal Lodge estate, while paying only a peppercorn rent.
The payments emerged after Andrew, who was stripped of his titles over his links to Jeffrey Epstein, was forced to leave Royal Lodge and move to Marsh Farm on the King’s Sandringham estate in Norfolk.
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His lease agreement showed he paid £1 million for the lease, along with “one peppercorn” in annual rent “if demanded”, and was also required to pay £7.5 million for refurbishment works completed in 2005.
Giving evidence to MPs, Mr Labbad said: “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: “Those potential income streams were taken into account in determining what best value was at the time.”
Mr Labbad said subletting was “reasonably common” in the property industry for long leaseholds, and said the arrangements made in 2003 had been subject to an independent valuation.
He told the committee: “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…”
“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.”
Asked how much Andrew made from subletting the cottages, Mr Labbad said he did not have that information and that it was a matter for the former duke.
But James Chalmers, the King’s keeper of the privy purse and treasurer, suggested the royal household could obtain the figure if requested.
He 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.”
Committee chairman Sir Geoffrey Clifton-Brown said it could be arranged for the household to provide the amount to the NAO in confidence if there were concerns about it being “more widely shared”.
The hearing also touched on other findings in the NAO report, including that the King pays for Princess Beatrice and Princess Eugenie to live in royal properties despite both being non-working royals.
The report found that for several years their rents were based on outdated market valuations, adjusted to reflect the fact that palace properties require tenants with security clearance.
Until this year, Eugenie’s rent for Ivy Cottage at Kensington Palace was based on a 2018 valuation, while Beatrice’s apartment at St James’s Palace was based on a 2020 valuation.
The NAO said Eugenie’s rent was 50 per cent of the 2018 open market value from 2020 to 2021, rising to between 55 per cent and 63 per cent between 2022 and 2025.
Beatrice’s rent was 60 per cent of the 2020 market value from 2020 to 2021, rising to between 62 per cent and 68 per cent between 2022 and 2025.
Current rates are now 64 per cent of a 2026 market valuation for Eugenie, and 68 per cent of a 2026 valuation for Beatrice.
Mr Chalmers told MPs the royal household had to be “very, very careful” about who was allowed to live in “very sensitive” parts of occupied royal palaces.
He said the household manages 255 properties across sites including Buckingham Palace, Windsor Castle, Kensington Palace and St James’s Palace, with 216 behind security cordons and mostly occupied by staff, as well as 12 other tenants.
Explaining the rental approach, Mr Chalmers said the household charged the 12 tenants based on an adjusted market rate 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”.
He added: “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.”
He said: “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 valuations had become out of date, rents had still been raised each year at a rate “slightly above the rate at which the market had moved”.
He said the household would reflect on the NAO’s findings and review its valuation policy, but suggested revaluations every five or six years might be more proportionate than doing them annually.