For section 151 of the 1985 Act there shall be substituted the following section—

“151 Terms and effect of conveyance or grant: general.

(1)

A conveyance of the freehold executed in pursuance of the right to acquire on rent to mortgage terms shall conform with Parts I and II of Schedule 6; a grant of a lease so executed shall conform with Parts I and III of that Schedule; and Part IV of that Schedule applies to such a conveyance or lease as it applies to a conveyance or lease executed in pursuance of the right to buy.

(2)

The secure tenancy comes to an end on the grant to the tenant of an estate in fee simple, or of a lease, in pursuance of the right to acquire on rent to mortgage terms; and if there is then a sub-tenancy section 139 of the M1Law of Property Act 1925 (effect of extinguishment of reversion) applies as on a merger or surrender.”

In Part III of Schedule 6 to the 1985 Act (terms of lease granted in pursuance of right to buy or right to acquire on rent to mortgage terms), after paragraph 16D there shall be inserted the following paragraph—

“16E

(1)

Where a lease of a flat granted in pursuance of the right to acquire on rent to mortgage terms requires the tenant to pay—

(a)

service charges in respect of repairs (including works for the making good of structural defects), or

(b)

improvement contributions,

his liability in respect of costs incurred at any time before the final payment is made is restricted as follows.

(2)

He is not required to pay any more than the amount determined by the formula—

$M=Px\frac{100-S}{100}$

where—

M = the maximum amount which he is required to pay;

P = the amount which, but for this paragraph, he would be required to pay;

S = the landlord’s share at the time expressed as a percentage.”