LEGAL action will be taken against the tenants of a dilapidated landmark York building - unless they agree to surrender the lease.

Lionel Davis and Keith Carby, who have the lease on the Bonding Warehouse, in Skeldergate, could now find themselves in court for thousands of pounds of rent arrears.

City council chiefs agreed yesterday to start legal proceedings against the pair - but also decided that negotiations would continue to give them a chance to surrender the lease of the premises.

The Bonding Warehouse was a busy restaurant and public house before being damaged by floodwater in November 2000.

The tenants have not traded from the 19th century riverside building since then, and have been locked in a war of words with City of York Council.

Mr Davis has claimed the council never carried out "certain" repairs to the building after the flooding.

He said the authority did not want him to reopen the Bonding Warehouse, and had plans to redevelop it as a residential property.

Last year, the building was occupied by a group of squatters as part of a campaign to protest against buildings being left empty in York.

The squatters said that a separate group of "gatecrashers" later entered the building and caused damage there.

Micklegate ward councillor Sandy Fraser, who represents Skeldergate, said there were concerns the building had fallen into a state of "disrepair" and should now be put to some community use, such as a facility for youngsters.

He also revealed residents had suggested it could be turned into an arts centre, or act as the station for a water taxi service.

Coun Fraser said: "The tenants could find themselves in court for rent arrears and failure to fulfil the full conditions of their lease.

"But coming to some agreement is always better than protracted legal proceedings.

"We're anxious that the building is brought back into good condition and is given some use.

"Hopefully it might involve some form of community use."

Coun Quentin Macdonald, the council's executive member for resources, said: "This is a complex legal situation and we've now decided this is the best way forward.

"We've had no right of access to improve the appearance of the building and we would love to make it look smarter for Royal Ascot."

Mr Davis and Mr Carby have a 50-year lease on the building, which runs until June 1, 2028, at a rent of £20,000 per annum.

A clause in the lease restricts the permitted user to licensed premises only.

Mr Davis said today he was "at a loss" to understand the council's action.

"We've tried for four-and-a-half years to negotiate with the council and on many occasions we've come to an agreement only for the council to back off," he said.

"We're quite prepared now to buy the leasehold from the council."

Updated: 10:06 Tuesday, March 22, 2005