Morpeth County Hall plans to be decided by government
Criticised plans to sell-off a council headquarters and build on the land have been called in by the government.
Morpeth Chamber of Trade chair Jacky Beesley said it was "unsatisfactory that the council was both the planning authority and the landowner that would benefit from approvals".
The council said it was "clearly a contentious issue".
"We note the decision of the secretary of state but as we are currently in purdah ahead of local elections in May we are unable to comment further", a spokesperson said.
Secretary of state Sajid Javid will now make a decision after a public inquiry, the Department for Communities and Local Government confirmed.
South Morpeth Coalition residents' group said 1,700 people had "finally been listened to".
David Holden, from the group, said: "The resolutions passed at the planning committee were disgraceful and made a mockery of the Morpeth Neighbourhood Plan, which was endorsed by nearly 4,000 residents last year with a 93% majority."
The neighbourhood plan made it clear the site was not suitable for retail and housing, he said.
"The principle of a new school is supported but the suggested location opposite a fast food drive thru is appalling," he said.
The coalition and the Morpeth and District Chamber of Trade submitted requests to the secretary of state for the plans to be called in.
There had been criticism of the cost of council plans to relocate its headquarters.
The authority said selling off the land and erecting a new £40m building in Ashington would be more cost-effective than refurbishing the current building.