Developers will be creating a new Dartmouth community isolated from the rest of the town with their masterplan for an £80 million West Dart development of more than 400 new homes, a powerful local development watchdog has warned.

At one point the Millwood Homes developers were looking at building over the town's existing park and ride site helping to tie the new community in more closely to the existing homes in Townstal – and replacing the park and ride elsewhere on the 80-acre site.

Now the proposals are that both the South Hams Council owned park and ride site and the next door playing fields will remain untouched – creating a major 'separation zone', the Dartmouth and Kingswear Society has declared in its latest statement.

The situation has become even more complicated by revelations that a covenant restricting the re-sale value of both the playing fields and the park and ride has been in force since the district council bought both sites more than a decade ago.

Warned the society: 'It was always going to be difficult to make the new community 'joined-up' with Townstal, let alone the lower town, because Milton Farm owners declined to sell their land for use by the developers. However, as a consequence of the stance now being taken by SHC, the optional open space at the centre of the development has been significantly increased, enlarging the separation zone from Townstal, creating an isolated, third Dartmouth community.'

South Hams Council has admitted that the covenant means that a percentage of any profits the council makes on the sale of the land will have to be paid to the ministry of defence – which sold off the land in the first place.

However the society declared: 'It is now clear that SHC has a conflict of interest between its role as the development's planning authority and its role as a land owner, because of the covenant.

'For whatever reason, it has been slow to disclose the fact of the covenant's existence. Indeed, its terms have still not been disclosed, though it may be assumed that they relate to who gets the proceeds, if the land is sold for development.'

The society statement added: 'The society calls on SHC to explain how the terms of the covenant have affected its decision to exclude the park and ride and the playing fields as potential sites for building the community hub and/or housing.'

South Hams Council did not say why it had taken so long for details of the covenant to surface although the consultation process over the massive development masterplan has been going on now for more than a year.

Said a council spokesman: 'The Council has been aware of the overage covenant which was imposed by the MoD during the sale of the land to the council. It does not preclude the development of the land for the intended purposes of the DPD for the West Dart development master plan, if it were to be agreed.

'The land concerned is the park and ride and the playing fields sites.  The overage covenant means that if the land does gain planning permission for homes or another use, a percentage of the uplift in value would be payable to the MOD if the land was sold by the Council.'

However the society was adamant as it said: 'The Society strongly supports the provision of playing fields and play areas as essential elements of the development, but has argued that they can be located elsewhere, and that building houses on the land adjacent to Townstal should take priority in the interests of a 'joined-up' community. There are alternative, suitable sites available for sports facilities, in particular the Jawbones Beacon Park, total 3.3 hectares, which is owned by SHDC.'

The Dartmouth and Kingswear Society is also critical of what it sees as the 'substantial disregard' of the original DPD boundaries and claims that the 'extensive development along the western edges of the site will create a type of urban sprawl along the A3122'.

It also added: 'Because it is a hilltop site, there will also be a negative visual impact from all directions.'