TIME could finally be running out for the company that was supposed to have transformed Watchet's East Quay into a mix of homes and businesses seven years ago.

Urban Splash has been given three months to come up with the goods or risk being booted off the project, possibly in favour of a community-led scheme.

And it seems the arrival of a social enterprise group, who want to see a mix of marine-based work units and space for "creative industries", may have finally spurred the developer into action.

In recent months, the firm has come up with scaled-down plans for 36 flats, commercial space and car parking after being faced with rival proposals from the Onion Collective.

The group is made up of local residents spearheaded by the sisters who helped secure a £3.2 grant to build Minehead EYE - Naomi Griffith and Jess Prendergrast - together with co-collective directors Rachel Kelly and Georgie Grant.

The group has been promised almost £80,000 in national funding to carry out a feasibility study on its plans, but that cash would only be forthcoming if the council severed its links with Urban Splash.

The firm was appointed as the council's chosen developer for the East Quay back in 2005.

But despite getting planning permission for flats and shops in 2006 nothing has happened since, partly due to the legal rights of the marina operator, which are set out in a "complex" lease with the council.

Urban Splash claims the marina operator's lease has created confusion as to who is allowed to do what on the East Quay and unless that is resolved no development can legally take place.

At Wednesday's meeting of West Somerset Council, members were told the renegotiation of the lease was key to the success of any future development, and that the operator was now keen to try and resolve the situation and a number of positive meetings had been held.

Among the problems facing the authority, which owns the East Quay and stands to make hundreds of thousands of pounds if Urban Splash does deliver, are a long list of legal rights given to the marina operator via the lease.

This includes having sole use of 35 car parking spaces in Harbour Road, being able to house 18 boats of no specified size on the East Quay and being allowed to have equipment to lift boats in and out of the water.

Adrian Dyer, the council's chief executive, said all sides were currently willing to talk and that meant there was hope of a resolution.

"There would have to be compromises on both sides," he said.

"There are things in it for [the marina operator] to compromise on that would be in our favour and things it for us to compromise on that would be in his favour."

Council leader Cllr Tim Taylor said the outcome of the talks was far from certain but he wanted to ensure whatever happened was the best possible outcome for Watchet.

But councillors were split over which route to take and whether Urban Splash should be allowed "one final, final chance", possibly at the expense of the Onion Collective, which could not claim the £80,000 grant while the developer was still linked to the council.

However, breaking the tie would see the council having to repay a £50,000 deposit paid by Urban Splash at the beginning of the agreement, plus an estimated £8,000 in interest.

Equally, if Urban Splash did manage to put together - and build - a successful scheme, the developer would have to pay the authority hundreds of thousands of pounds for the site lease, while the council would also receive extra Government cash for providing new homes in the district.

Cllr Eddie May told councillors it was clear Urban Splash had only "woken up" because they faced losing out to the Onion Collective and said action had to be taken: "This has been going on long enough and needs to be put to bed."

Councillors argued over the pros and cons of backing one side over the other but the majority eventually voted to give Urban Splash one last chance.

The council voted not to break its ties with the developer at this stage, but gave them until the end of July to successfully complete negotiations with the marina operator.

Urban Splash would also be expected to work alongside the Onion Collective, Watchet Town Council and Watchet Boat Owners Association, while the outcomes would be reported back to the council on August 14.

That report would outline whether issues had been resolved with the marina operator and include details of Urban Splash's proposed development and how it would be financed.

Councillors would then have to decide whether to stick with Urban Splash, break ties with them or give them six months to submit a planning application or risk being kicked-off the project.