THE sale of an historic North-East hall appears to have collapsed after the owner became aware of the buyer's arrest as part of an investigation into an alleged fraud, The Northern Echo can reveal.

Businessman Garry Moat claimed this week that he had exchanged contracts to buy Windlestone Hall, near Rushyford, Bishop Auckland.

However, owner William Davenport said Mr Moat had not revealed during negotiations that he had been arrested by Northumbria Police as part of an investigation into an alleged telecoms fraud.

Mr Davenport said he had also been unaware when he signed sale documents in December last year that Mr Moat had been involved in a number of businesses which had collapsed with large debts.

The dispute is the latest twist in a long-running saga involving the 30-bedroomed grade II* listed mansion, which was the family home of former Prime Minister Sir Anthony Eden and has been described by English Heritage as one of the region's most important buildings.

Mr Moat, from Corbridge, Northumberland, this week said a deal for the 25.5 acres of parkland surrounding the hall and some of the outbuildings have been agreed, while contracts had been exchanged for the hall subject to planning permission being granted.

"When it all goes through Will Davenport will receive in excess of £1m for something he paid £250,000 for," the businessman told the Echo.

Mr Moat is currently on bail with Northumbria Police after being arrested and interviewed in connection with an investigation into the conduct of several North-East telecommunications businesses, including One Cloud Solutions and Sumlock Electronics (North East) Ltd.

Mr Moat confirmed he was interviewed by police about 18 months in connection with the investigation, but said he was never charged.

He added that as far as he and his solicitor were concerned he was not on police bail, although the Echo understands Mr Moat remains on police bail until September.

Regarding his connections with One Cloud, he said he had been a director of the company for just one day because of an administrative error.

He added that he had invested money in One Cloud but had lost £2.5m, and had never been a director of Sumlock.

Mr Moat viewed Windlestone Hall this week with project advisor John Gibson.

Both men are named as directors of Windlestone Hall Estates Ltd, a company set up in December last year.

It is understood the potential buyers want to restore the hall and convert it into luxury flats using money raised from a housing development on the surrounding land.

Following the viewing, a spokesman for Mr Davenport told the Echo that the owner was unaware when signing the contracts of Mr Moat's arrest.

The spokesman added: "At no time did either Garry Moat or any of his advisors ever volunteer any such vital information nor also the fact that Mr Moat has been involved in a host of liquidated companies that have crashed with debts of many millions of pounds leaving a string of disadvantaged creditors."

Mr Davenport added that he now disputed the sale and he remained the registered owner of the land and property.

In 2012, Durham County Council came under fire after it emerged Windlestone Hall had been sold by the authority to Mr Davenport for £241,000.

Weardale county councillor, John Shuttleworth, reported the sale to the Audit Commission, claiming it had been sold for a fraction of what it was worth.

An independent auditor found no evidence the council's valuation of the hall was "deficient", although he did criticise the level of transparency surrounding the deal.

Detectives from Durham Police are continuing to examine the sale from the council to Mr Davenport following a complaint by Cllr Shuttleworth.

The saga surrounding the property took a new turn earlier this year when it emerged Mr Davenport had been arrested by Durham officers on suspicion of fraud.

It is unclear what the exact nature of the alleged fraud is.