TEESDALE District Council has been found guilty of maladministration after businesses were forced to make way for housing.

The Local Government Ombudsman was asked to examine the council's decision to approve a controversial scheme to replace businesses in Commercial Yard, Barnard Castle, with new homes.

Although she criticised council officers for the advice they gave to members, who granted planning permission for the development in April 2002, the ombudsman believes the outcome would probably have been the same.

The ombudsman found planning officers did not properly explain to the development control committee the council's policy about where business premises in rural areas should be protected.

She has advised that parts of the Local Plan be reviewed and rewritten to make the guidance clearer in future.

A complaint was also made about four councillors failing to declare an interest in the application. The ombudsman found one should have declared an interest but was not required to withdraw, two were not aware of their interests and the fourth councillor's interest was too remote to be declared.

Councillor John Watson said: "The council has no choice but to take this finding of maladministration very seriously indeed.

"I didn't feel the council was in a position to make the decision at the time, in the absence of business and retail studies of the town and more information about the businesses affected."

Councillor Newton Wood said the businesses, which included a cafe, greengrocer, blacksmith and a taxi firm were not given the support they were promised.

He said: "They were told that the council would find alternative premises but they have had to do it alone and some have had to move to poor alternatives."

When permission was granted to convert stone buildings into six houses and build two terraces of six houses each, more than 1,500 people signed a petition against the plans and objectors staged a protest at the council's Galgate offices.

Mike Dennis, head of administration at Teesdale District Council, said: "We need to carefully consider the decision and reasons for the ombudsman's findings. After examining the report in much more detail we may make a further response."