An independent inquiry into the deal will be held by Blackpool Council leader Simon Blackburn, after it emerged that the multi-million pound portfolio was sold to housing group Great Place for £3.

Great Place will be converting the failing holiday accommodation back into family homes as part of a social housing pilot scheme.

Councillor Blackburn told the Blackpool Gazette: “There has been a lot of controversy surrounding the council’s purchase of properties in Crystal Road and subsequent sale of the houses for £1 each.

“Recognising the public interest relating to local authorities and the money they spend, I have now requested the chief executive commission a full independent audit into the criteria for selecting the properties involved, the price paid for their purchase and how that related to the condition of the buildings along with the price for which they were subsequently sold.

“The results of the audit will be made public as soon as the process is completed,” he explained.

Questions have been asked after the Council used Homes and Communities Agency funding to purchase the properties.

The Council had originally purchased the failing hotels with plans to refurbish each property, but sold them to the housing scheme after they couldn’t afford the costs of £130,000 per property.

The deals, which were agreed in March 2010, included the purchase of a Crystal Road property belonging to former Conservative councillors Ian and Susan Fowler.

Further transactions that are now under scrutiny include the Council’s £200,000 purchase of the Saville hotel on Tyldesley Road and the £850,000 purchase of the King Edward Apartments situated on Central Drive.

One resident, Mr Palmer, of Denstone Avenue, said: “The Council spent £2.7m of taxpayers’ money buying up redundant hotels, guest houses and flats in three locations using Homes and Communities Agency funding (tax payers’ money).

“They then went on to sell all this property off in three lots for £1 per lot to Great Places.”

Former Councillor Susan Fowler stated that the sale was above board. “Some people will ask questions but we really have nothing to reproach ourselves for as sellers of a property in an area that is going to be uplifted,” she said.