The financial timebomb ticking for owners of new homes

Councils can demand cash from builders for environmental and infrastructure projects under what are called Section 106 agreements, which are legally binding and are drawn up when planning permission is granted.

But if the developer defaults on the payments, legal responsibility can pass to buyers, and one Yorkshire authority is now considering a plan to pursue individual purchasers for the unpaid cash.

Sheffield Council has drawn up a list of several developments where payments have not been made, and said action must be taken to recover the money, a move which sparked outrage last night.

It is understood owners of currently affected properties may not be aware of possible liability because no formal action has yet been taken, so no warning would have appeared on the public register at the time of purchase.

Members of the Liberal Democrat-controlled authority will meet tomorrow to discuss measures which may lead to the council launching legal claims to enforce agreements worth hundreds of thousands of pounds.

Because the developments in the spotlight are complete and almost fully occupied, planning officers will advise that the option is now open to pursue private purchasers for cash.

Chairman of the planning committee involved, Janice Sidebottom, said the authority had always aimed to make developers pay up first, but admitted that individuals could become liable.

She added: "It would be a long way down the process. It also depends how far it is worth pursuing, but I suspect the council's auditor and other council taxpayers probably would not be happy if we did not get the money back.

"What the council is trying to do is bring the developer to court earlier. It would then be easier for a solicitor to pick up that there is a charge on the property."

Planning officials across the country are facing similar difficulties and the Government's Planning Advisory Service has received inquiries on how to deal with the situation from councils nationwide.

Timothy Kirkhope, the Yorkshire MEP who leads the Conservatives in Brussels, described pursuing homeowners as "ridiculous" and said councils should chase developers for money much earlier.

He added: "This has worrying implications for people across the country and should serve as a warning. It is serious and the council should be careful before proceeding against individuals.

"The question arises over whether the local authority has been negligent in not getting the money sooner. They should really have the section 106 money upfront before properties are sold."

On one of the worst-affected developments in Sheffield, an apartment building in the city centre, builders have failed to pay a sum of 90,030.35 which was supposed to be used for public open space.

If the bill remains unpaid by the developer, the owners of each property in the 80-flat block could be left to pay a share of around 1,100 to meet obligations.

John O'Connell, of the TaxPayers' Alliance, said homebuyers were facing tough enough conditions and added: "It doesn't seem fair that because the council cannot get the money from developers they turn to taxpayers to foot the bill, especially after they have already paid out other costs.

"Much more needs to be done when these contracts are drawn up to ensure that taxpayers are not left ill-informed and do not have to pick up the tab when things go wrong."