The surprise development will be an acute embarrassment to the junior minister in charge of decentralisation, Tom Parlon, who has trumpeted the Fas move, involving over 400 staff, into the heart of his own constituency.

Over two years ago, Fas put down a deposit on a site just outside Birr for its new headquarters. It agreed to pay 1.5m for the site or around 300,000 an acre . . . more per acre than the Department of Justice paid for the site of the new prison in Thornton Hall, north Co Dublin.

The five-acre site was part of a 25-acre site owned by the voluntary housing agency Respond.

The Fas/Respond agreement was subject to planning permission and rights of way issues which sparked legal tussles over the last couple of years. A major dispute emerged as to who would build and maintain an access road to the site, without which the Fas headquarters would be effectively marooned.

While the row dragged on, Fas also became immersed in a bitter industrial dispute with its staff about the move to the midlands.

Then, last week, Respond returned the state agency's deposit and said it had sold the entire 25-acre site to a property developer.

A Fas spokesman said Respond had included a clause in the deal compelling the developer to agree the same terms and conditions of sale as agreed between Respond and Fas. "If the terms and conditions are changed in any way, we will not be buying the site, " the Fas spokesman warned.

But it is unclear if such a clause would have any legal standing and the feeling is that Fas will now have to look elsewhere. If so, this would seriously delay the planned move which Parlon promised would be completed by 2009.