The leader of Haringey Council will call for an independent investigation into the authority’s property transactions amid ongoing controversy over a council-led housing scheme.

Cllr Peray Ahmet announced the move to fellow councillors after it emerged the Metropolitan Police had been investigating allegations of fraud linked to a proposed development at former care home Cranwood House in Muswell Hill.

The council initially planned to demolish terraced homes to make way for the Cranwood development and spent more than £2 million buying up one of the properties, but the planned demolition was later dropped in favour of a new scheme.

A report by the Local Government Ombudsman (LGO), published in January, found the council failed to keep in touch with the owner of a neighbouring house that it had also revealed plans to buy as part of the initial demolition proposals. The ombudsman told the council to pay £1,000 in compensation to the homeowner for the stress and uncertainty caused by its approach to the development.

Read more: Site to be re-looked at after Ombudsman criticises council's handling of scheme

Opposition Liberal Democrat councillors subsequently raised concerns over an alleged “cover-up culture” at the civic centre and called for an independent investigation after the council failed to hand over information to the ombudsman and to inform Cllr Ahmet about the report.

In a recent email to councillors seen by the Local Democracy Reporting Service, Cllr Ahmet said that in consultation with the cabinet she would ask for “an independent external investigation into historical arrangements for property transactions” amid the ongoing fallout from the LGO report.

The council leader also pledged to take “strong action” to compensate the affected resident and to ensure the decision-making process for property deals is “robust, transparent and accountable”.

Liberal Democrats are set to call for a wide-ranging investigation into the authority’s property deals at an extraordinary meeting of the full council on Tuesday.

Read more: Call for dialogue on housing scheme after tenants ‘sent eviction letters’

Lib Dem leader Cllr Luke Cawley-Harrison has tabled a motion to the meeting calling for an external auditor to complete an investigation into “the possibility of existence of fraud and corruption within the council”.

The motion also raises concerns that other decisions – such as the purchase of office block Alexandra House, which the council bought for more than double its £10 million value in 2020 – have been taken “without proper processes in place and without oversight”.

A council spokesperson said: “In consultation with the cabinet, the leader will instigate an independent external investigation into historical arrangements for property transactions.

“Cllr Ahmet has spoken to Cllr Cawley-Harrison and made him an offer to be involved in the process for setting the scope of the investigation, and in her email to councillors confirmed a meeting for that purpose will be set up between the new interim chief executive, Cllr Cawley-Harrison and herself.”

A spokesperson for the Metropolitan Police said: “We can confirm that officers from the Met’s north area command are investigating allegations of fraud received in March 2021 that relate to a housing development in Haringey.

“There have been no arrests. Enquiries continue.”