TOWN hall bosses appear set on a legal collision course with Burnley and Padiham Community Housing -- just seven months after handing over their entire 5,000-home stock of council houses to the company.

Council finance chiefs have revealed that they are spending £2,000 on legal advice to find if they can force Burnley's biggest landlord to reverse a rents policy which has seen some demands increase by up to 200 per cent.

Councillors believe the new company has broken a legally-binding promise -- given by both housing bosses and the council -- that rents to new tenants would rise by just a one-off 20 per cent when they moved in.

Since then the company has admitted that rents on around 150 of their cheapest homes will increase by 200 per cent to newcomers.

In addition, it has implemented a policy which means that rents on all houses will go to set levels above £60-a-week to new tenants -- taking hundreds more above the 20 per cent rise promise. The company has said some of the highest rents will be frozen and the overall average rise will be around the 20 per cent promised -- although it refused to release figures to support that view.

Council Independent group leader Harry Brooks said the council had now been placed in the position of having to spend £2,000 on legal advice because the company had not done what it said it would do in the agreement.

He said the company had "blatantly disregarded" its commitment and told members of the resources committee: "They never had any intention of keeping that promise. It has been a deliberate attempt to get around the agreement."

He added: "I only hope the council can find some way of keeping them to to their word. It is a diabolical state of affairs that we have to pursue this in this way"

Committee chairman Peter Kenyon said: "I think the company has broken the spirit of the agreement and we must look to see if we can make that fact stick."

But today the company said it had complied with both the spirit and letter of the law and was committed to keeping its promises.

A spokesman added that since transfer 263 new properties had been let to new tenants, with an average increase of just over 20 per cent.

The spokesman said the company had also adopted a new rent structure for new tenants -- a factor critics say they promised not to implement for some years after the transfer.