IT is one of the best- known examples of a community buyout in Scotland; but now the tiny island of Gigha is facing financial ruin - as well as a deeply divided community.

The Isle of Gigha Heritage Trust (IGHT), which runs the island off the west coast of Kintyre, is in a "precarious" financial position with debts of £2.7 million, according to documents seen by the Sunday Herald.

The island's only hotel - a hub for islanders that is owned by the community - has been closed over the winter as part of emergency cost-cutting measures, with the bar open just two nights a week.

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Tensions are such that islanders will this week take part in vote of confidence in the chairwoman of the trust, Margaret McSporran.

Gigha, known as "God's Island", transferred to ownership of the IGHT in March 2002 following a successful community buyout of £4m by 98 islanders, after it was put up for sale by its then owner, millionaire businessman Derek Holt.

Previous lairds of the island included Malcolm Potier, who was jailed for six-and-a-half years in Australia in 2002 for trying to hire a hit man to kill his ex-partner and her lover.

The community buyout was hailed as a chance to secure the future of the island and reverse years of decline.

Gigha's population has increased to nearly 170 since the buyout, and improvements have been made, such as the refurbishment of housing stock and the setting up of wind turbines.

But now a strategic review of the IGHT has indicated serious concerns about the future.

The document states: "The IGHT is in a precarious financial position, with total third-party debts of £2.7m. The overall debt structure is unsustainable based on current revenues."

It notes that significant progress has been made in taking steps to address the issue, but says a turnaround plan needs to be devised and immediately implemented.

The report later warns "ongoing operation carrying the currently level of debt will result in the business rapidly becoming unsustainable".

McSporran, meanwhile, has ­written to islanders seeking a "clear vote of confidence" in her appointment as chairman, following concerns that have been raised over "the division which is arising in our community".

The vote is due to be counted on Thursday. The IGHT also has a board of directors and a chief executive, Fergus Waters.

Among those unhappy with the trust is farmer Dan Jackson, who moved to the island in May this year from Staffordshire.

He was to become the new tenant of a trust-owned dairy farm, but is now preparing to leave after a series of disputes with IGHT over the lease.

Jackson said: "I thought Gigha would be a great opportunity, but it has been a shambles.

"We moved all our machinery and it cost thousands to get it here. We sourced a load of cows as I had sold all the cattle I had back at home, which were beef cattle.

"Then when I came here I was treated like a piece of muck, really."

Jackson claims that despite ­drawing up an extensive business plan and attending interviews before moving to the island, the trust rejected his proposals for improvement work on the farm.

He says the farm was not fit for purpose and he was expected to pay for equipment that did not work and fallen-down fencing as part of the cost of taking up the lease.

Jackson also claims the trust refused to negotiate on allowing him to stay in the farm until the end of April next year, which would have enabled forage to be used up instead of letting it go to waste.

He added: "We now have got nowhere to go. We have advertised the cows to sell them, but we are going to lose a lot of money on them as the milk price has plummeted since we bought them.

"We gave up everything to come up here, so we have no land to go back to, or premises, or anything."

Other islanders were reluctant to talk about the island's financial woes. But one local, who now lives on the mainland but visits the island frequently, said: "Apart from the huge debt there is no community spirit now. The incomers and mainland advisers have no idea what life used to be like.

"Everyone talks about the trust every day and this has caused ­divisions. There is too much going on behind closed doors."

One islander said the trust was facing an "onerous task". "Everyone is doing their utmost to get it to work and it is something we must get working," he said. "It is easy to find fault."

Land reform campaigner and author Andy ­Wightman said any company that owned a substantial asset was likely to face issues and challenges.

He said community-owned land should have an advantage in having the commitment of residents to sort problems out - but pointed out a downside was that they often lacked access to sources of external cash in the way of a "merchant banker from London who owns an estate in Argyll" and can "just bung money its way".

He added: "At least they have the capacity to resolve those ­problems now, which they didn't before.

"Judging it is not simply to look at it in isolation and say, 'Is it successful on its own terms?' - it is to say, 'Is it a move in the right direction?' I would always argue yes, as you are putting these kind of issues and problems and responsibilities in the hands of the people rather than relying on the vagaries of the international property market."

McSporran said improvements on Gigha since the buyout included refurbishment of housing stock, development of affordable housing, redevelopment of the harbour and the setting up of four wind turbines to generate income for the island.

She said: "All businesses review their business plans and structures and we are no different. We have recently carried out a strategic review, with the support of Highlands and Islands Enterprise, which has focused on the use of our assets, financial performance and debts of the trust.

"The management of debt is part of our plans for the future."

Responding to the claims made by Jackson, she said he had been offered a tenancy on the basis he regarded all improvements as "tenant's fixtures", which meant the trust could either purchase or remove the buildings at the end of the lease.

She added: "An ingoing ­valuation was arrived at by two separate valuers as is the normal custom and the figure was known to Mr Jackson before he moved to the island. However, Mr Jackson refused to pay the valuation despite several concessions on the trust's part.

"A 20-year lease was offered to Mr Jackson and he has chosen not to sign it.

"The trust is committed to letting the farm to a go-ahead, enthusiastic farmer who will fit in with the island community. It is unfortunate that we could not conclude a lease with Mr Jackson."

She said communications from Jackson had been responded to in a "timely and reasonable way" and all his proposals carefully considered, adding: "Where agreement could be reached, we have acted in good faith to accommodate his demands."