Residents in two Manchester apartment blocks with flammable cladding have called on the council to deny the buildings’ developer a £190m contract to redevelop the city’s town hall.

The Australian company Lendlease, which built the towers in Manchester’s Green Quarter in 2013, is thought to be among those bidding to refurbish the Grade I-listed building.

Vallea Court and Cypress Place, which include 345 flats, failed post-Grenfell fire safety checks last summer. They were found to have aluminium composite material (ACM) cladding, similar to that on Grenfell Tower. The blocks’ residents say they are living in fear for their lives while they wait for the cladding to be removed.

Lendlease sold the freehold for the buildings to an investment firm, Pemberstone, in 2015. Pemberstone is now taking the owners of the apartments to tribunal in an effort to force them to pay the estimated £3m bill to have the cladding replaced. Residents who own flats in the buildings – many of whom bought their homes through the government’s Help to Buy scheme – have turned to crowdfunding to raise money for legal advice.

Calling on the council to reject any bid by the company for contracts, Katie Kelly, who lives in one of the blocks, said: “It sends a message that big businesses can get away with anything. They can make things that are not safe and risk people’s lives and then they can wash their hands of it with no repercussions.”

The tribunal’s decision on the apartment blocks is expected around early August. The buildings’ manager is currently employing a 24-hour waking watch as an interim fire-safety measure, and Pemberstone is recouping the cost of about £7,000 a month through the service charge. The company said it would not pursue payment until after the tribunal was over.

Flat owners highlighted a letter they received from Lendlease when they first bought their flats, which read: “Lendlease will undertake, at our expense, to complete any accepted defect that has arisen as a result of either faulty materials or defective workmanship.”

Kelly said: “If you bought a new car from a manufacturer and it suddenly set on fire as you were driving it and they all had to be recalled, you wouldn’t be expected to pay for the fact that it was faulty.”

She said Lendlease had installed cladding that “potentially risks everybody’s lives in the apartments”, then “sold [the freehold] to Pemberstone and walked away and that’s it”.

Facebook Twitter Pinterest Cladding is removed from Whitebeam Court, in Pendleton, Greater Manchester, last year. Photograph: Peter Byrne/PA

Lendlease already has contracts to undertake other building work in Manchester city centre, which is experiencing a construction boom. In March it was announced that Lendlease would build a series of apartment and office blocks in the new £1bn St John’s neighbourhood. It is also building the city’s New Square development.

A Manchester city council spokesman said: “We invited tenders for a management contractor for the town hall project through an open procurement process and are currently assessing first-stage proposals against a number of set criteria which were specified at the outset. As this is an ongoing competitive process which is subject to UK and EU public procurement law, we cannot comment further.”

The council has previously said leaseholders should not be expected to stump up the cost of replacing failed cladding, but a source at the council said this had nothing to do with the procurement process.

Last year Australian media reported that Lendlease would cover the cost of removing flammable cladding from Melbourne’s Royal Women’s hospital, which was built by a division of the company and opened in 2008. This followed the Lacrosse tower fire in the city in 2014, in which fire on flammable cladding jumped 13 floors in 11 minutes. The fire marked the start of a public debate in Australia about the issue of flammable cladding, three years before the Grenfell fire.

Residents in the blocks in Manchester have pointed to the decision this year by Barratt Developments to pay for new cladding on the Citiscape block in Croydon, south London, despite it no longer owning the building or having any legal liability for the cladding. Barratt was applauded by the then housing secretary, Sajid Javid, for “doing the right thing”.

The residents say they cannot sell, remortgage or rent their flats while the dispute over cladding is ongoing, and so they are stuck living in a “giant tinderbox”. They have talked of living in constant fear of a fire spreading through the building.

Last month a fire broke out on a balcony on a neighbouring block, sending the residents of Vallea Court and Cypress Place into a panic.

“I got woken up by people at 7am honking their car horns and shouting fire in the street,” said 22-year-old Pippa Wells. “So I looked out of my balcony and saw smoke coming from the building next door and ran down stairs in my pyjamas, barefoot. I was just thinking, this is horrifying, how is this happening?”

Lendlease declined to comment and referred the Guardian to Pemberstone, which said: “The tribunal is an independent forum to which either landlords or leaseholders can apply to establish clarity on issues relating to service charges or repair costs.

“Tribunals are commonly used within the residential property sector and are particularly appropriate for large schemes like this, where there are 345 apartments, over 70% of which are owned by investors, some located overseas.”

• This article was amended on 20 July 2018 to correct a paragraph about Barratt Developments’ Citiscape block in Croydon.