After section 32 of the M1Leasehold Reform Act 1967 there shall be inserted—

“32A Property transferred for public benefit etc.

(1)

A notice of a person’s desire to have the freehold of a house and premises under this Part shall be of no effect if at the relevant time the whole or any part of the house and premises is qualifying property and either—

(a)

the tenancy was created after the commencement of Chapter III of Part I of the Leasehold Reform, Housing and Urban Development Act 1993; or

(b)

(where the tenancy was created before that commencement) the tenant would not be entitled to have the freehold if either or both of sections 1A and 1B above were not in force.

(2)

For the purposes of this section the whole or any part of the house and premises is qualifying property if—

(a)

it has been designated under section 31(1)(b), (c) or (d) of the Inheritance Tax Act 1984 (designation and undertakings relating to conditionally exempt transfers), whether with or without any other property, and no chargeable event has subsequently occurred with respect to it; or

(b)

an application to the Board for it to be so designated is pending; or

(c)

it is the property of a body not established or conducted for profit and a direction has been given in relation to it under section 26 of that Act (gifts for public benefit), whether with or without any other property; or

(d)

an application to the Board for a direction to be so given in relation to it is pending.

(3)

For the purposes of subsection (2) above an application is pending as from the time when it is made to the Board until such time as it is either granted or refused by the Board or withdrawn by the applicant; and for this purpose an application shall not be regarded as made unless and until the applicant has submitted to the Board all such information in support of the application as is required by the Board.

(4)

A notice of a person’s desire to have the freehold of a house and premises under this Part shall cease to have effect if—

(a)

before completion of the conveyance in pursuance of the tenant’s notice, the whole or any part of the house and premises becomes qualifying property; and

(b)

the condition set out in subsection (1)(a) or (as the case may be) subsection (1)(b) above is satisfied.

(5)

Where a tenant’s notice ceases to have effect by virtue of subsection (4) above—

(a)

section 9(4) above shall not apply to require the tenant to make any payment to the landlord in respect of costs incurred by reason of the notice; and

(b)

the person who applied or is applying for designation or a direction shall be liable to the tenant for all reasonable costs incurred by the tenant in connection with his claim to acquire the freehold of the house and premises.

(6)

Where it is claimed that subsection (1) or (4) above applies in relation to a tenant’s notice, the person making the claim shall, at the time of making it, furnish the tenant with evidence in support of it; and if he fails to do so he shall be liable for any costs which are reasonably incurred by the tenant in consequence of the failure.

(7)

In subsection (2) above—

(a)

paragraphs (a) and (b) apply to designation under section 34(1)(a), (b) or (c) of the Finance Act 1975 or section 77(1)(b), (c) or (d) of the Finance Act 1976 as they apply to designation under section 31(1)(b), (c) or (d) of the Inheritance Tax Act 1984; and

(b)

paragraphs (c) and (d) apply to a direction under paragraph 13 of Schedule 6 to the Finance Act 1975 as they apply to a direction under section 26 of that Act of 1984.

(8)

In this section—

“the Board” means the Commissioners of Inland Revenue;

“chargeable event” means—

(a)

any event which in accordance with any provision of Chapter II of Part II of the Inheritance Tax Act 1984 (exempt transfers) is a chargeable event, including any such provision as applied by section 78(3) of that Act (conditionally exempt occasions); or

(b)

any event which would have been a chargeable event in the circumstances mentioned in section 79(3) of that Act (exemption from ten-yearly charge).”