Andrew sublet three cottages while paying ‘peppercorn rent’ to crown estate

He paid a £1m premium and £7.5m on refurbishment of Royal Lodge under the 75-year lease in 2003, and could be entitled to between £301,967.66 and £488,342.21 compensation by surrendering it early, the report said. However, the crown estate has previously said it is likely he will not be owed any compensation once dilapidations are taken into account.

Sources suggested Mountbatten-Windsor’s subletting did not generate a profit and that the rent was set at a rate to cover only maintenance and running costs for staff living there. However, no figures, such as repair and household costs versus rental income, or copies of the rental agreements, have been made public.

Public money through the sovereign grant is used for the maintenance and operational costs of the occupied royal palaces. But sources suggested the adjusted rents paid by the king for Beatrice and Eugenie’s palace residences covered the costs met by the sovereign grant on those properties and therefore there was no additional cost to the grant.

Norman Baker, a former Liberal Democrat minister, said the arrangements for Mountbatten-Windsor added “insult to injury … not only that Andrew was able to have a peppercorn rent for a gigantic property, but then to make potentially millions on the side from subletting properties. The money should have gone to the crown estate, not into [his] pockets”.

The Duke and Duchess of Edinburgh paid a £5m premium for Bagshot Park, their home on the Windsor estate. A new lease granted in August 2007 replaced the previous lease, with Prince Edward paying £1.38m against the original 1998 lease. The couple pay a peppercorn rent. They also generated income by renting out the stable block up to 2020, the report said.

Seven members of the royal family lease five properties from the crown estate. The lease terms vary, and were agreed at the open market value at the time, with the crown estate seeking independent professional advice on the financial terms, the report said.

The royal household provides 11 working royals, including Charles and Camilla, with seven residences within the occupied royal palaces at no cost in exchange for their official duties.

The report states: “Generally, we found [the crown estate] applied standard practices across the leases we examined and in line with its processes. Where we found differences, these related to specific terms within lease agreements for the same lease type. Each lease was agreed at different points in time over a 50-year period, so some variation in practice and outcomes is to be expected.”

A spokesperson for the crown estate said:“The crown estate welcomes the National Audit Office’s review, which confirms its leases with members of the royal family were agreed in line with independent, professional advice and open market valuations. We look forward to discussing the report further with the public accounts committee in due course.”

A Buckingham Palace spokesperson said: “We are grateful to the National Audit Office for this report, which is in line with the royal household’s commitment to transparency. We hope that the findings will help correct, clarify or contextualise a number of points regarding royal properties. As the report notes, arrangements for properties managed by the royal household vary based on a number of factors to ensure residences are filled appropriately, depending on their location, tenants and purpose.”