THE new owner of a mansion that is home to one of the region's most enduring ghost stories believes he is inches from the truth that spawned the centuries-old legend.

The Grey Lady is supposed to have suffered a tragic death following a doomed romance, and is widely believed to have been haunting Beamish Hall, near Stanley, County Durham, ever since.

The Grade II-listed building recently changed hands for an undisclosed seven figure sum.

New owner David Craggs believes he may have found evidence to support the story of her love affair with a man who lived in nearby Pockerley Manor, now part of Beamish Museum.

"There have always been stories about a tunnel that stretches for a mile-and-a-half to Pockerley," said Mr Craggs.

"We have found old cellars behind the ladies' toilets and there is what looks like a tunnel entrance. For some reason, many years ago, it was bricked up.

"I am dying to know what is behind it and so will a lot of other people."

John Gall, head of development at Beamish Museum, said: "There are rumours of tunnels criss-crossing this part of County Durham.

"But, because of the water table around here, it is likely the Grey Lady would have had to take a deep breath for an Olympic swim to use a tunnel to Pockerley."

But he believes there still could be a kernel of truth in the legend.

"We know the lovers could not have lived after 1800 because of our records," he said. "Pockerley Manor dates back to Saxon times and is even older than Beamish Hall, so they could have been the backdrop to this story."

Holt Castle Enterprises bought the site from Durham County Council in 2000. The company carried out extensive renovation work and marketed the hall and 24-acre grounds as a romantic setting for weddings and a conference venue.

Mr Craggs, who lives at a farm yards from the hall, bought the property outright last week after months of negotiations, and plans to fully restore its grandeur.

Originally, he had intended to turn it into luxury flats, but has now decided to carry on the wedding and conference business.

He also plans to restore the 14 bedrooms and open as a hotel, after negotiations with English Heritage and Derwentside District Council.

"I used to run around the hall as a kid," he said. "I live at the end of the road and realised there was an opportunity to do something with such a special building."

A 30-month programme of works will see the hall completely refurbished, including the restoration of the once-famed winter gardens.

The building will still be available for weddings and conferences throughout this time