Irish property company Ballymore faces a legal battle to hold onto its key multimillion euro development site in Hungary, it emerged yesterday.

Ballymore, which is owned by prominent property developer Seán Mulryan, is being challenged for ownership of a 20-acre site in Budapest city centre. Hungarian firm Pólus is claiming that it owns a pre-emption right on the site, which was bought by Ballymore in May 2003 for more than €13 million.

Ballymore bought the site from Hungarian railway company MÁV in an auction and plans to invest several hundred million euro in a mixed-use commercial and retail development.

However, Pólus has begun legal action against Ballymore claiming that it holds a pre-emption right to acquire the site at the price paid by Ballymore.

It claims that it had previously bought a pre-emption right to buy the site from a subsidiary of MÁV called MÁV Multiszolg.

Pólus recently won a first-instance court decision, which is not legally binding, Ballymore director Henry Prestage, told The Irish Times yesterday .

Mr Prestage said Ballymore had been shocked by the court decision but was confident the company would prevail in the expected future court case.

"In our view, these are the last desperate actions of a local real estate company, which lost the site in a public auction."

Ballymore and MÁV have also lodged a lawsuit against Pólus and Multiszolg, claiming a limitation of market competition.

Before the legal action began, Ballymore had planned to begin work on the project in 2006 and complete development within four or five years.

It is seeking to develop two million square feet of land for a mix of retail, office, residential and leisure facilities.

Mr Prestage said he expected the lawsuit to have been decided within three or four months.

Media coverage of the legal dispute appeared in the Budapest Business Journal earlier this week, which said Ballymore would claim compensation for loss of profit if it failed to acquire the full legal title over the site.

Ballymore is also the subject of a separate legal dispute in the Czech Republic over ownership of the landmark Kotva department store in Prague. Kotva, which was built in 1975, was the focus of a major scandal during the 1990s in the Czech Republic.

A group of investors who claim to have lost money in a deal involving Kotva are seeking ownership of the department store from Markland, a partnership between Ballymore and Patrick Kelly of Kelland Homes.