The move has sparked off a war of words between the council and the Chinatown Development Company Ltd over the scheme which has been dogged by delays and disputes.

The council has instructed solicitors to start legal proceedings to forfeit two leases on the city centre site.

A statutory demand has also been issued for £950,000 owed to the council by the developers

The council is threatening to start winding-up proceedings against the developer which is part of the North Point Global group of companies.

North Point Global has been trying to sell the scheme since April after work stalled at the groundworks stage after main contractor Bilt Group went into liquidation.

Councillor Ann O’Byrne, Deputy Mayor of Liverpool, said: “Liverpool City Council has explored every avenue and worked with the developer in the proposed transfer of the Chinatown site to a new buyer, but insufficient progress has been made.

“There are a number of challenges which could affect the transfer to any new buyer and in light of new legal advice and financial information, the approach to market the site has become unviable.

“We have sought reassurances from Chinatown Development Company Ltd but regrettably an agreement could not be reached and the council has been left with no choice but to take this new course of action.”

Chinatown Development Company (CDC) said it was the victim of a “witch hunt” by Liverpool City Council (LCC).

It said: “As LCC are aware CDC have been in negotiation for the sale of the whole site with various parties but LCC seem determined to make this process as difficult as possible to progress.

“CDC has only had the opportunity to negotiate with prospective purchasers since the beginning of April 2017. Three months is not a great deal of time to negotiate a sale for a site of this magnitude.

“However CDC has formally agreed terms for a sale which is currently in the hands of solicitors who are drafting contract documentation.

“LCC has previously attempted to block a sale by CDC on the basis that they required the property to be placed on the open market, but CDC received legal advice that LCC are not in a position to dictate who CDC sell Chinatown Liverpool to.”

Investors in the scheme – many of whom are from the Far East – are growng increasingly concerned about deposit cash they have put down for flats in the first phase of the scheme.