A ROW broke out this week after it was revealed the value of local council homes sold to Magna West Somerset Housing Association had more than doubled within a year of the deal.

Magna, which set up a West Somerset subsidiary to manage the 1,880 properties, paid the district council £25.7 million.

West Somerset district councillors at the time praised the deal as the richest achieved by any council in the country at more than £13,000 per property.

But now accounts for Magna West Somerset's first year of operation have put a £53 million valuation on the same stock of homes.

It meant a £27.3 million paper profit for Magna West Somerset, which in return spent some £3 million on programmed repairs and response maintenance during the year.

In the same 12 months, Magna collected more than £5 million in rents and service charges from its West Somerset tenants.

The figures were externally audited by Southampton-based accountants Ernst and Young.

District council leader Cllr Steven Pugsley defended the authority's deal with Magna.

But Cllr Pugsley, who is one of five council representatives on the Magna West Somerset board, said he was also puzzled by the £53 million valuation.

Cllr Pugsley said he sought a personal assurance from new Magna chief executive Graham Colls that it was a "perfectly legal and normal" accounting practice.

He said: " It does not mean West Somerset sold the houses too cheaply.

"We got the best price per house that has been achieved by anyone.

"It was all done thoroughly with external advice and Housing Corporation and Government approval."

District Cllr David Banks, who opposed the housing sale, this week claimed the West Somerset homes were grossly undervalued when they were sold to Magna.

Cllr Banks said: "Any tour of the council house stock before transfer would have told any lay person that the houses contained in the portfolio were worth two, three or even four times that value.

"Because of the rural identity of the district, lots of these properties had gardens that were more like smallholdings to enable tenants to compensate for low seasonal wages by growing produce of their own.

"During the transfer, and since, I have been approached by local builders who would have loved the opportunity to bid for properties at that price.

"It was a give-away of stock that was accumulated through the investment of generations of ratepayers both before and since the creation of the district in 1974.

"The council houses were an investment by the community in the housing of the future."

Cllr Banks said Magna's £53 million re-valuation proved how ridiculous was the selling price.

He said the new value was achieved despite Magna's poor record on property maintenance.

Magna spokesman Fiona Childs denied the West Somerset properties were bought at half-price.

Miss Childs told the Free Press: "The council got a good price for them."

She said the housing stock was separately valued by both parties before the deal was struck.

The purchase price was based on cash-flow and reflected the fact the association would be restricted to charging only a 'social' rent to its tenants.

It also took into account the extent of improvements which had to be carried out to the homes.

Miss Childs said for accounting purposes a re-valuation was carried out annually and a full valuation exercise was conducted every five years.

She said the first re-valuation always showed a large difference but the figures tended to even themselves out over a period of time.

l Miss Childs pledged West Somerset tenants would not have to help meet £2.4 million losses suffered by the parent Magna group on a disastrous contract for maintenance of former council homes in South Oxfordshire.

The contract was cancelled by South Oxfordshire Housing Association after just two years of a five-year deal during which Magna lost more than £1 million annually.

It resulted in redundancy for around 60 contract maintenance staff, many of them former South Oxfordshire council workers.

Miss Childs said the losses would be met by extending Magna's debt repayment schedule in its business plan, rather than by increasing rents to raise extra revenue.

She said the losses would fall only on Magna's Dorset tenants, who financed the main Magna operation.

Magna West Somerset was a separate entity and its tenants would not see any impact on their rents.

"We have ring-fenced it so the losses do not go any further. The money will not come from West Somerset rents," she said.

Miss Childs revealed Magna had decided to mothball a building company set up by its former chief executive Glen Bengough and former finance director Steve Webberley.

The only remaining director of Minterne Properties Ltd was operations director Derek Cash, who was now also in charge of servicing Magna West Somerset.

Mr Bengough took early retirement on the grounds of ill-health just weeks after the Free Press revealed the Housing Corporation had placed Magna under supervision following an investigation into serious concerns about the way it was being run.

Mr Webberley left shortly afterwards by "mutual consent".

Minterne was set up in 1997-98 and started trading in the following financial year.

Miss Childs said it recently ceased trading after a decision by the Magna board, which had not yet settled the issue of whether to keep it as a dormant company or to wind it up.

Minterne was intended to be a separately run arm of Magna tendering for contracts both within and outside the association.