TWO agencies have been ordered to pay compensation to a flood-threatened family, after a Government watchdog found they had mismanaged the building of a housing estate.

An investigation by Government watchdog the Ombudsman found maladministration with injustice by both Derwentside District Council and the Environment Agency.

It follows a complaint by a couple, who have not been named, over planning permission granted for a seven-house estate on the site of the old Russell Close scrapyard, on the A691 in Lanchester.

The couple, dubbed Mr and Mrs Martin in the Ombudsman's report, claimed that restrictions placed on the development, which borders their land, meant the ground level of the scrapyard site was raised and now causes their property to flood.

Council leader Alex Watson said: "We are very surprised and disappointed with this report. Statutory bodies like the Environment Agency are there to be consulted and we did that.

"There is not much more we can do, unless we are supposed to be telling the Environment Agency how to do its job."

The complaint relates to planning permission granted by the council in 2001 for seven homes on the site. Work started on the homes in 2002.

The Government watchdog awarded the couple £500 in compensation from the council, and £250 from the Environment Agency.

The report states: "Both the council and the Environment Agency missed references in later reports which should have drawn their attention to the fact that the land was to be raised by up to one metre in places, which they believe has caused their land to be waterlogged and has been flooded in times of heavy rain."

The Ombudsman has also ordered the council and the agency to carry out a full flood risk assessment of the couple's property. If a risk of flooding is established, they will have to pay for flood prevention works.

Coun Watson said: "We have never had any complaints of flooding in this area since the estate was built.

"We are confident the flood risk assessment will prove that there is not a flood risk."

The couple who made the complaint have asked not to be identified. They were unavailable for comment.

A spokeswoman for the Environment Agency said it was considering the recommendations made by the Ombudsman.