TAOISEACH Brian Cowen is facing a potentially embarrassing court action after being accused of illegally renting a flat to an English university.
He is part of an Irish group which invested in a block of "student cluster apartments" designed and built as a hall of residence in Leeds.
The company that owns the ground rent of the development is threatening to take Mr Cowen and his fellow investors to court over non-payment of stg£100,000 (€112,000) in rent and management fees. Among the claims to be made will be that Mr Cowen is illegally sub-letting his flat to Leeds University.
Among the 37 other investors in the buy-to-rent development who also face legal proceedings are Mr Cowen's personal assistant, Sinead Dooley, and her husband, former All-Ireland winning Offaly hurler Johnny Dooley.
Another is Fine Gael senator Paddy Burke, who is a close ally of Fine Gael leader Enda Kenny. It comes as Mr Cowen's Government is preparing legislation to set up a new State agency charged with taking over the domestic and foreign property loans given out by Irish banks to investors.
The purchase of the student apartment block, which cost around stg£12.5m (€14m) overall, was financed through mortgages taken out by the investors with Allied Irish Bank.
Mr Cowen bought one of the apartments in the Carr Mills complex in Leeds in 2005. He and the other investors decided to pool their leases so the apartments could be easily rented to students attending the nearby Leeds University.
They approached the developer of the complex to seek his permission to let the apartments to the university. They were told it would not be "problematic" and assumed the legal requirements had been complied with. But a formal written consent licence to go ahead with the letting was not recorded.
When the developer-landlord sold his interest to Adderstone Group, a Newcastle-based property company, this lack of formal written permission for Mr Cowen and his co-investors to sub-let to Leeds University immediately became obvious.
Adderstone Group has written to Mr Cowen and the other lease holders informing them: "Contrary to the terms of your leases you have sub-let without authority to the University of Leeds." It has described that as "an irredeemable breach of covenant" and has warned the investors that they face legal action "with a view to repossessing the property".
It is understood that the company was not aware of Mr Cowen's position as Taoiseach, because he and his wife Mary had their address listed in the British Land Registry as 60 Merrion Square, Dublin 2.
This was the address of a property investment company which is no longer based in the office. The most recent claim for management fees sent to Mr Cowen's address as recorded in the Land Registry was returned, with a note attached saying "Not known at this address".
According to a student interviewed at Carr Mills, Leeds University charges annual rents of around stg£4,000 (€4,500).
Mr Cowen's apartment can accommodate seven students in individual bedrooms sharing a kitchen and dining area, suggesting an annual return of up to stg£28,000 (€31,500).
Mr Cowen and his fellow investors also have to deal with a collective bill of up to stg£100,000 for ground rent and management fees.
If the dispute cannot be resolved through negotiation, Mr Cowen and his fellow investors face the possibility of being pursued by Adderstone in the English courts.
Lavelle Coleman solicitors, representing Mr Cowen and the investors, said last night that it was in advanced negotiations with Adderstone to regularise the position.
"We are confident that the matter can be resolved to the satisfaction of all parties," a spokeswoman said.
A spokesman for Mr Cowen has said the issue was a dispute over a licence to lease the property, and there was no question of any attempt at illegality. Mr Cowen has declared his purchase of the apartment in Leeds in 2005 on his register of interests, along with his apartment in Golden Lane in Dublin and his apartment at the Cammock building, in Mount Brown, Kilmainham.