Pelltar not only owns a house, which he shares with his 3 underlings, he also owns one of the three warehouses in town and "has a deed to the tower" at the Baron's castle and "an agreement of entry even if the Baron were to die," a little foreshadowing for Lakofka's sequel module L2 Assassin's Knot. An agreement of entry indeed; the tower is so heavily locked, trapped, and guarded (by skeletons of Pelltar's creation--what kind of man animates the dead for his own purposes?) that Pelltar is the only person who can access it. I can't imagine a scenario in which the Baron is not rankled a bit by this arrangement; the highest point and most defensible structure in his castle is off limits to his own garrison! The tower--where Pelltar is able to quite literally look down on his supposed liege-lord--is a potent symbol indeed of who truly wields the phallus of Restenford.
There is little mention in this module of the actual relationship between Pelltar and Baron Grellus, we must insinuate everything from a few tidbits. For instance we know that their is a chair for "the Sorcerer" on the second tier of the throne room, just below that of the Baron and his wife. I think it safe to assume that the sorcerer in question is Pelltar and that he acts in an official capacity as an adviser to the Baron. Also, the "Garrison Location Chart" indicates that the Baron and Pelltar are the only 2 persons who are likely to occupy the tower; there is a 3% chance during the day and 1% chance at night that the Baron can be found in the tower; presumably seeking Pelltar's council.
Another reference to the sorcerer and the baron can be found under the Druid's Home description on pg. 26:
"Almax [the druid] is second only to Pelltar in authority, after the Baron."The odd phrasing--wouldn't it be more economical to say that the druid is third in authority if one meant to say so?--might insinuate that the Baron has less authority over his subjects than his title would indicate, ranking perhaps after not only the sorcerer but also the druid.
An additional source of information is the ever-cryptic rumor list (italicized rumors are false):
We already know about his underlings; this rumor is likely included as a lead to help PC parties to find adventuring help. This module along with T1 Village of Hommlet commit a fair amount of text to supplying NPCs who might be willing to join an adventuring party, which speaks to the way the game was likely played by the creators. But the second rumor--a petty attempt to diminish Pelltar's status by asserting that he is a mere 7th level magic user--indicates a certain amount of ill-will towards the sorcerer. Was the rumor started by someone in the Baron's household? One of the sorcerer's so-called loyal employees? Whether this sentiment is prevalent throughout the community or the opinion of only a few, it seems evident that someone feels that the man needs to be taken down a notch or two.
"The sorceror has a number of magic users working for him"
"The magic user who calls himself a sorceror is only an enchanter"