HOUSING bosses have submitted a multi-million pound claim to town hall officials after discovering asbestos in hundreds of former council homes.

The move has prompted fears that Blackburn with Darwen council tax payers may have to meet the cost of a legal battle with Twin Valley Homes.

And Twin Valley has said that rents could rise if the matter is not resolved.

Blackburn with Darwen Council is taking legal advice after the housing association, which took over the management of 10,000 former council homes in 2001, submitted a claim for an alleged breach of warranties during the transfer.

Twin Valley Homes said it had to divert money into a project to remove asbestos from around 100 homes in the Delph Lane area of Blackburn earlier this year.

Residents were not said to be at risk from the asbestos.

But the housing association said it had now estimated the cost of removing asbestos from its total stock to be more than £2.8million -- and it wants the money back.

The full extent of the potential cost to Blackburn with Darwen Council is not known.

But Alan Cotton, the council's director of finance, told a meeting of the council's executive board last week that the bill could run into "millions and millions of pounds."

Town Hall chiefs have already allocated £65,000 for legal costs and surveying work following Twin Valley's claim.

A spokesman for the housing association, formed out of Blackburn with Darwen Council's housing department when it was placed in the private sector, said it had been given an assurance by the council that none of its homes contained the potentially lethal building material.

The association also said that it had given the council an option of insuring against the discovery of asbestos, which it claimed was not taken up.

The council today said "legal reasons" prevented it from commenting on the insurance aspect of the case and declined to comment on Twin Valley's claim it had been given an assurance.

But a report to the executive board said the claim hinged on this matter.

A spokesman for the Asbestos Watchdog, a national, voluntary organisation backed by insurance companies, said it was the first case of its kind it had been made aware of.

Carol Mason, 42, has lived in Sandwich Close, Blackburn, for just over a year, and asbestos was discovered in an empty house next door in May.

She said: "We've only been here a year and would rather just move somewhere else. Surely someone should have had an idea there was asbestos in here."

Albert Taylor, 66, has been an owner-occupier on Romney Walk , Blackburn, for 21 years and heads the Romney Walk Tenants and Residents Association.

He said: "I think the council has a moral obligation to sort this out and I think it's about time they did."

Council Conservative leader Coun Colin Rigby said he was concerned about the risk of council tax payers having to meet any legal bill.

But he added: "I would make sure something was right before I bought it. I am concerned about what appears to be a laxity in a department, which until the hand-over, was part of the council."

Twin Valley chief executive Phil Richards said that when a multi-million pound home improvement got under way, it emerged that there were issues around asbestos removal from some properties.

He said they were now looking at all former council homes, even if they had subsequently been sold and added: "We are currently talking with the council about the extent of the problem and each other's liabilities to agree a way forward."

Coun Mohammed Khan, council executive member for housing and neighbourhoods said: "There are some concerns about asbestos removal in some Twin Valley Homes properties.

"Both the council and Twin Valley Homes are working together to establish the extent of the problem and exploring potential remedies.

"It is not appropriate for us to comment on the issue of indemnity for legal reasons."