LEASEHOLDERS of an historic landmark tower in York want to sub-let it as offices at a profit of more than 24 million per cent.

Keyland Developments Ltd, a subsidiary of Kelda, the parent company of Yorkshire Water, is looking for tenants of empty offices at Lendal Tower at a rent of £55,000 per year.

Yet the early 14th century defence tower on which Kelda has inherited a 500-year lease, pays an annual rent to landowners, the City of York Council, of just... two peppercorns, together worth a mere 0.214 pence.

Their value is based on 560 peppercorns bought for 60 pence at health food shop Tullivers in York. The rent expected is 24,299,065 times that.

Payment of the peppercorn rent has been an annual ceremony ever since Henry Whistler, a London merchant, leased the Ouse-side structure from the city in 1677 to use as a water tower supplying York.

The practice continued throughout the ownership of York Waterworks and its subsequent takeover and closure by Yorkshire Water.

Last year's Lord Mayor, Coun Shan Braund, formally accepted the two peppercorns from Yorkshire Water in March - and the ceremony is likely to continue for the next 176 years remaining on the lease.

Alistair Gill of commercial property agents, DTZ Debenham Tie Leung of York, acting for Keyland Developments, said he was marketing two separate offices alongside the tower, which once served as the boardroom for the old York Waterworks.

One was Lendal Hill House, on three floors of cellular offices - as opposed to open plan - of about 2,560 sq ft. The other was Lendal Hill offices, alongside the Museum Gardens, which is 2,809 sq ft on two floors of open-plan offices fitted to a high standard.

Asked if it was fair that the rents did not accrue to the City of York, Mr Gill said: "Keyland inherited it from York Waterworks and it just so happens that they inherited the peppercorn rent with it.

"The Lendal offices equate to £10.50 per sq ft and Lendal Hill House equals about £7 per sq ft. These are very competitive rents for the York market."

John Reid, senior consultant in the property department of the City of York Council said: "It's virtually a freehold owned by Keyland and we can't interfere.

"But when the lease comes to an end in 2177 the city will start to reap the benefits. I'm looking forward to it..."

Updated: 14:49 Friday, March 01, 2002