A dispute over a proposed £200 million housing scheme near Tower Bridge is heading for the High Court.

Southwark council is taking action against Berkeley Homes over claims it illegally erected hoardings and carried out works without consent on Potters Fields coach park.

The developer wants to build 386 flats in cylindrical towers on the fouracre site, despite the rejection of its initial planning request and the council owning half the plot.

Southwark originally turned down the plans because it wanted to see a major cultural centre on Potters Fields and none was offered.

But the Berkeley application, which included a cluster of eight tall buildings, was approved after an appeal in 2006. John Prescott, then deputy prime minister, granted the permission. Now Southwark is refusing to sell its land to Berkeley and maintains it should be used for cultural facilities.

Ken Livingstone accused the Liberal Democrat-controlled council of stalling Berkeley's development at last year's Labour conference. He claimed Southwark's demands for an arts centre were political delaying tactics and threatened to use his compulsory purchase order powers to force the borough to sell its half of the site.

But the council said it was outrageous for the Mayor to consider forcing the sale of the land for the benefit of a private developer.

Annie Shepperd, the borough's chief executive, said: "Southwark's ambitions for Potters Fields have always been clear. An attempt to compulsorily purchase this land would result in a lengthy legal battle that could cost millions of pounds."

A Berkeley Homes spokesman said: "These legal proceedings are the latest in a series of unfortunate steps taken by the council over the years. The cost to local taxpayers has been many hundreds of thousands of pounds."