Prince Edward pays only a token rent on his 120-room mansion in Windsor Great Park, papers from the Crown Estate reveal.

Under a contract signed by his company in 2007, he took out a 150-year lease on Mansion House in Bagshot Park, Surrey, for an upfront fee of £5million.

It permits Edward, the Duke of Edinburgh, to pay an undisclosed ‘peppercorn’ rent – so-called because historically some leases cost just one peppercorn a year.

Campaigners are now questioning how the prince, 61, and his wife Sophie can defend living in such a grand property when the Crown Estate could rent it out on the open market with the taxpayer benefiting.

The Grade II-listed, 19th century mansion – built for Queen Victoria’s son Prince Arthur – is set in 51 acres. Edward first leased it in March 1998, a National Audit Office (NAO) report shows. He initially paid £5,000 a year. 

Extensive renovations, costing £2.98million, were carried out, with Edward paying £1.36million. The Crown Estate covered the rest of the cost.

Edward then paid £90,000 a year to live there, described at the time as ‘market value’ by the NAO.

Now, according to the terms of Edward’s lease extension, signed in 2007 with his company Eclipse Nominees Ltd, he paid £5million upfront for a lease of 150 years. But he pays only an unspecified peppercorn rent, according to The Times.

Officials had considered allowing Mansion House to have grace and favour status, allowing free royal occupancy. But Buckingham Palace declined that approach, preferring a commercial arrangement to give the Crown Estate income.

Agents estimate that, following the renovations, a long residential lease signed in 1998 would have been worth between £2.5million and £8million. The Crown Estate had carried out a ‘discreet marketing campaign focused on selected potential tenants’, a 2005 NAO report revealed.

However, it received only two exploratory offers – one to use the house as a conference centre, the other as a hotel. Both were rejected on the grounds that the former would break a statutory obligation to retain the character of a royal park and the latter involved additional land.

Last month, it was revealed Edward’s brother Andrew Mountbatten-Windsor enjoyed a peppercorn rent on Royal Lodge, Windsor.

Royal author Norman Baker, an ex-Lib Dem minister, told The Times: ‘It is obscene not just that Edward and Sophie have been given a 120-room mansion to live in, but even more so that they have to pay a peppercorn rent, less than a struggling couple would pay to rent a poky flat in Romford.’

A spokesman for Republic, a pressure group which campaigns to abolish the monarchy, said: ‘Most people have no idea who Edward is or what he does. Why is he getting any state subsidy?’

The Crown Estate and Buckingham Palace have both declined to comment.