The £1m house worth just £500,000 (only locals need apply)

To the casual eye it is a luxury £1m property on the banks of Loch Lomond, complete with woodland, a private jetty and parking for up to eight vehicles. But to one local authority this magnificent estate is simply "affordable housing".

To the casual eye it is a luxury £1m property on the banks of Loch Lomond, complete with woodland, a private jetty and parking for up to eight vehicles. But to one local authority this magnificent estate is simply "affordable housing".

And yesterday marked the start of a landmark court battle which, the estate's owners claim, could have implications for hundreds of homeowners across Britain.

Alastair Kerr, 79, and his wife Grace, 74, are fighting to have a classification overturned which stipulates that as "affordable housing" their property must be sold to people on low incomes living in their area. The Kerrs claim the order - imposed as a planning condition when they converted an old barn into a house and art gallery in 1994 - has in effect halved the value of their home and possibly rendered it impossible to sell.

Mr Kerr's family have had control of the land, near the conservation village of Luss, since the 1930s and outright ownership of the plot since 1965. At first the Kerrs, who had built up a thriving business as art dealers and publishers of artistic prints, accepted the condition but claim that it was only later that the full constraints of the deal became clear.

Although the couple do not want to sell their home, they are concerned that their daughter Fiona, who stands to inherit the house, could be left with an impossible problem. Unless she can move into the property immediately on their death she will be prevented from renting it out and may not be able to sell - even at a much reduced price.

According to the planning authority, and the National Park, the Kerrs' home is, and must remain, an "affordable house" - a category usually reserved for properties worth around £50,000 and designed for low-income families. Moreover, less than 0.004 per cent of the British population - those who live no further than seven and a half miles away - would be eligible to buy it. The couple claim that the figure equates to a total of about 3,000 people. Mr Kerr said: "They said they wouldn't give planning consent unless we agreed to this condition even though we argued it was illegal use of planning legislation. Only a fool would buy a house with a Section 50 on it as that would limit them too."

Yesterday the couple began the latest battle in their fight to have the conditions dropped, a move which could provide hope to thousands of other homeowners in similar situations throughout the country. In an appeal hearing before Lord Gill, Lord Justice Clerk, and Lords Penrose and Kirkwood at the Court of Session in Edinburgh, the couple argued the imposition of an occupancy condition was flawed as their house was a conversion of an existing structure and not a new building.

The Kerrs claim the occupancy conditions amount to an unjust limitation on the value and use of their property, which was never designed to be low -income accommodation.

It is calculated that in England alone, up to 100,000 affordable homes are needed each year, many of them purpose-built and incorporated into new estates by developers. While the numbers are slightly less in Scotland, the majority of councils still use such orders to prevent the loss of local housing stock to holiday homes or incomers capable of pricing out residents.

Under the definition used by the Scottish Executive, "affordable housing" is property of reasonable quality that is affordable to people on modest incomes. But with the gardening bill alone for the Kerr's estate running at more than £2,000 a year, they argue that their house, which is in council tax band H, could not possibly be considered as falling into that definition. "The bands for affordable housing in Scotland are Bands A and B with a few in band C," said Mr Kerr, who was born in Luss and has lived in the area all his life. "We know of no other houses in band H. The council tax alone would be too much for those people affordable housing" is aimed at.

If the Kerrs win their test case it could be used as a precedent to lift similar orders on homes throughout the area and other parts of Britain.

Local authorities fear policies providing affordable housing could be diluted. Although Dumbarton council initially put the Section 50 on the house, the cause of retaining it has been taken up by its successor, Argyll and Bute council, and now the Loch Lomond and Trossachs National Park, which wants to protect the supply of homes for their employees and other local people.

In a previous appeal in 2001, which the Kerrs lost, Reporter Karen Haywood said the council had made it clear that "the Loch Lomond area has traditionally been an area of demand for second/holiday homes and that to restrict such development, planning conditions and legal agreements restricting occupancy will be imposed on all new planning permission for housing". She ruled that the restriction was necessary.

But Mr Kerr said: "We can see no justification for Park authority employees to be given preferential terms to buy property of this scale. Our house was never designed or intended to fit into an affordable category.

"Why should the use of Section 50 be used to steal from one to benefit another? Why was permission granted to build such a large and expensive property? This was an error of planning which we cannot be blamed for.

"This has less to do with money than principle. I'm lucky I can afford to fight this.

"Most people have all their money invested in their homes so why should they have to take a 35 per cent to 50 per cent drop in their greatest asset?" The hearing continues this week.