VANCOUVER — The troubled Vancouver Olympic village project went into receivership Wednesday when the city took control of the project in an effort to recoup $740 million in taxpayer funds.

In a last-minute arranged deal to stave off legal action, Millennium Southeast False Creek Properties agreed to relinquish control to court-appointed receiver Ernst & Young. It followed a lengthy dispute with the city over how Millennium would repay its loans in the face of a growing gap between the value of the assets and its legal obligations.

But the deal doesn’t include any assurances that taxpayers will get back all of the money the city loaned, Mayor Gregor Robertson said. That will depend on how well Ernst & Young does in selling the remaining 480 units, and whether the city can obtain value from a string of non-village assets Millennium pledged as security.

The city was preparing to go to B.C. Supreme Court to petition Millennium into receivership when the company’s owners, Shahram and Peter Malek, agreed to the voluntary assignment to protect the integrity of the project, city manager Penny Ballem said.

The arrangement means the Maleks are “no longer in control” of the project but remain financially obligated to cover the debt owed to the city, she said. Neither the project nor the Maleks are in bankruptcy, she said, noting the city had simply assumed control of the Olympic Village. The brothers remain the technical owners of the project but the receiver now has total jurisdiction.

Robertson described the arrangement as “good news” for the city because it would bring stability to the project and improve the city’s chances of recouping most of the money it had loaned to Millennium.

“Today’s announcement of a negotiated agreement with Millennium is good news for the Olympic village and will result in a new sense of stability and confidence in the project,” Robertson said.

“It is both in the best interests of Vancouver taxpayers and the long-term health of the village.”

Both Ballem and Robertson offered compliments to the Maleks, saying they had built a remarkable village that continues to win awards for its construction and sustainability. But they said the city still needed assurance that the taxpayers’ loans would be repaid, and saw no other way but for the city to take control of the project.

Neither the mayor nor Ballem could say whether taxpayers will get back all of the money, including the balance of a $193-million sale of city-owned land on which the village sits.

“I have never said that the taxpayers were risk-free on this project. For the last two years since daylighting the financial details, I have said the taxpayers are on the hook,” Robertson said. “Those risks continue. It all hinges on the sales of those condos and the years to come.”

The Maleks were noticeably absent from the late-afternoon news conference, which was held shortly after the city obtained a Supreme Court order stipulating Ernst & Young as the receiver. The Maleks declined to comment. The city said the brothers had signed a non-disclosure agreement.