A Darlington building firm has announced an ambitious £75m plan to transform a derelict industrial area into the town's largest single development.

Bussey and Armstrong Projects is due to submit an outline planning application to Darlington Borough Council today to develop the 115-acre area at Faverdale, which includes the site of the former Darchem chemical works.

The plans include 500-600 new houses, 33 acres of park and woodland, a new ground for Mowden Park rugby club and an acute mental hospital.

Bussey and Armstrong says exhaustive tests carried out by geologists and environmental scientists for the past year have scotched fears of dangerous contamination of the land and water.

If planning permission is granted, the firm says reclamation work could start within 12 months and building work would follow soon after.

Mr Tony Cooper, director of Bussey and Armstrong, said: "As house builders, we are concentrating on the former factory site, as this has got the biggest perception problem. We think it is important that a local firm does the home-building work to reassure buyers that the site is perfectly safe.

"The other areas, such as the park, rugby club and hospital, would be handled by other firms.

"The proposed West Park is as big as the existing South Park and we are trying to create a community built around the park and the rugby club."

The bid follows the 515-home development recently completed at the nearby Grange Park estate.

Mr John Buxton, director of development and environment, said the borough council was very interested in the proposal.

He said: "It is an exciting project, but there are a lot of hurdles to cross before we can give it our support.

"The council wants to see the site reclaimed and developed properly, and any development that seeks to do that is going to be looked at very carefully."

Mr Buxton confirmed that school places and other public amenities such as roads would be among the main considerations of the application.

He added: "There is a general principle that where housing developments increase numbers to beyond capacity, the developer is asked to fund the building of new classrooms at existing schools as part of planning conditions. As the proposal stands it does not include a new school, so this is one of the possibilities that will be looked at."

County Durham and Darlington priority services NHS trust has been looking for a potential site to replace the Pierremont unit at Darlington Memorial hospital for the past 18 months. It believes the proposed site at Faverdale would be ideal for the new 85-bed mental hospital.

The trust's chief executive, Mr Sandy Taylor, said: "It is a step closer to modern mental health facilities for local people.

"Assuming satisfactory approval of the business case and planning application, we would anticipate starting construction on site in early 2002."

Mowden Park rugby club is keen to be involved with the development as it seeks to build on its recent success and push for a place in the national leagues.

Club secretary, Mr George Nevill, said although the plans were at a very early stage, negotiations were ongoing to sell the existing ground, and the proposed Faverdale development would be the club's preferred new site.

He added: "It would give us better facilities, which we need if we are to safeguard the future of the club.

"There is a lot to go through yet, but if the Faverdale application goes ahead, we would look at the possibility of opening up the clubhouse to the public to serve the community.