COUNCIL bosses are to resurrect a £2.8m housing deal, after they were criticised for trying to sell the land for £500,000 to a rival bidder.

Derwentside District Council planned to sell 4.25 acres of scrub land in Orwell Gardens, South Stanley, for £500,000, to a company for a specialist healthcare centre that promised to create 100 jobs.

The decision caused anger when it emerged that developer Haslam Homes had offered to pay £2.82m for the same site.

Yesterday, council chiefs announced that the care centre deal was off and they would be entering into new discussions with Haslam Homes.

Mike Clark, Derwentside District Council's executive director, said: "We will now go back to the highest bidder and talk to them about how we further the deal.

"But it is only a bid and there are no guarantees that Haslam Homes will go forward with the bid, or that we will sell the land to them."

Healthcare company Paragon had intended building a centre for people with complex learning difficulties, such as autism.

It won the backing of council leader Alex Watson after it pledged the operation would create more than 100 jobs, and would meet an identified need for up to 60 families in the Stanley area.

But the council's overview and scrutiny committee raised concerns that three builders had also put in conditional offers for Orwell Gardens.

The highest, at £2.82m, came from Haslam Homes, in Gateshead, to build 68 houses on the site.

Richard Bass, the company's regional land director, said last night: "We are still interested in the site.

"Our offer came with conditions and we will have to wait and see what the council says when it comes back to us."

It was understood that Paragon had withdrawn its bid for Orwell Gardens and was looking at other sites in Derwentside.

The council is still hopeful of finding a place for the care centre within the district.

Mr Clark said: "We are still trying to encourage Paragon's interest in Derwentside.

"But any piece of council-owned land identified will have to go through the proper tendering process, and Paragon may not be willing to wait."