A council has launched a legal battle against venture capitalists trying to close an elderly people's home sold off by the council before the general election.

Wandsworth borough council, which sold the home in 1996, is taking Four Seasons to court later this month in a bid to prevent the closure of Holybourne House in Roehampton, south west London. If the home closed, the council would have to find new homes for its 42 residents, who are aged up to 98.

Council leader Edward Lister said: 'This is a very important case which will have implications for local authorities and care home owners throughout the country.

'The outcome will be watched closely by everyone concerned with care for the elderly. There is a real issue here about the rights of elderly people in residential care.'

Four Seasons owns 99 UK nursing and residential homes for elderly people.

It took over Holybourne House from Cresta Care last year. The new company is itself owned by Alchemy Partners, a firm of venture capitalists.

Geoff Martin, campaigns director of pressure group London Health Emergency, said the 'ramifications for the rest of the country could be horrendous'.

Many councils had sold off residential and nursing homes, yet the private sector stood to make 'serious money' if it could sell such property in prime locations.

'If this company gets away with it in Wandsworth, it will allow companies to shut old people's homes everywhere.'

The case has echoes of the ground-breaking 'Coughlan case' last year in which a disabled woman successfully argued that North and East Devon health authority was wrong to close a residential home because she had been promised a home for life.

Wandsworth council argues that 14 residents of Holybourne House were 'guaranteed a home for life' by the company that bought it in 1996.

Wandsworth chair of social services Ian Hart said the council was 'resolved to enforce' the agreement. 'That was the deal the company which bought the home signed up to.'

He claimed the company had not told the council of the original closure plan.

The Royal College of Nursing is 'watching this case with interest', policy adviser Helen Caulfield said.

The Care Standards Bill going through Parliament would put residential homes on the same statutory basis as nursing homes so a legal decision could affect the whole sector, she said.

It is understood that the company claims the home is running at a loss and is having difficulty meeting registration standards.

But Wandsworth council says it has offered to increase payments for residents and claims that the registration problems could be overcome.

No-one at Four Seasons was available for comment.