A property developer is suing Weymouth & Portland Borough Council for misrepresentation after the sale of one of the authority’s former offices fell through.
The council has in turn said it will issue a counterclaim against the subsidiary of Acorn South over the failed deal, which related to the North Quay site.
Acorn South has been approached for comment. However, its regional managing director, Stuart Callaghan, told the BBC: "They have put us in a position where we have no option but to take legal action which could ultimately cost hard-pressed council tax payers millions of pounds.
"It remains our hope that the council will review its position and proceed with the deal in the terms agreed between us."
Weymouth & Portland meanwhile said it was “extremely disappointed” that it had had to end its contract with Acorn South’s subsidiary.
“This follows a number of attempts to complete the sale in accordance with the contract,” the local authority claimed.
The council said it had offered North Quay for sale on an unconditional basis. “This means the sale was not subject to any particular planning consent being secured. Acorn submitted the highest unconditional bid, and as such was selected as the purchaser for the site. Contracts were exchanged in September 2016, binding both the council and Acorn into a sale which had no planning conditions.”
Acorn then reportedly sought to use permitted development rights to facilitate redevelopment of the existing building.
Weymouth & Borough said: “The council – as the planning authority, having taken advice – has concluded that change of use of North Quay requires a planning application. Acorn have appealed to the Planning Inspectorate about that conclusion.
“The council would expect any developer to carry out due diligence and establish key details such as planning status if that is an essential element of its strategy for the site. This would be expected prior to exchanging contracts.”
The council said its records showed that Acorn had been advised of the planning status at the bidding stage. “It is clear however that Acorn did not engage in further discussions with the council on planning matters before exchange of contracts.”
The authority added: “At no time did any officer from the council offer any verbal or written assurances to Acorn that the existing building could be converted to residential use without specific planning consent. Any such assurances simply would not feature in contract negotiations with a developer.”
The council and Acorn had exchanged contracts in September 2016, with an agreed completion date of 31 July 2017.
“In this time, Acorn had 10 months to engage with the community and elected members and communicate its vision for the site. It also gave them time to apply for planning permission for their proposed development. Acorn failed to do any of this. Only in August – a month after completion was meant to take place – did Acorn commence the process of seeking change of use consent,” Weymouth & Portland said.
The council said it had given Acorn another deadline of 15 September to complete the purchase but this was also missed.
“As a result of Acorn’s failure to complete despite additional time – and its lack of progress with planning – the council has lost all confidence in Acorn’s commitment to the sale, and their ability to complete,” the council said.
Weymouth & Portland said it was “regrettable” that Acorn had commenced legal proceedings against the council for misrepresentation of the sale.
“The council is extremely disappointed with Acorn’s handling of the matter and will be vigorously defending its claim. The council is confident of our position. In addition, the council will be counter claiming to recover earlier and ongoing costs associated with Acorn’s failure to complete on the property,” it added, saying members would now review the options for moving forward.