The Gulls had agreed terms with Tranmere over a future transfer and Hazell was in the midst of a week's training on the English Riviera to ensure both parties were happy with the arrangement. However, Tranmere issued a 'sign him or send him back' ultimatum to the South Devon club, who asked for an extra day to assess him and see him in action in a specially arranged in-house match.
"This is a strange one but he's their player and they can do what they want with him," a disappointed McFarland told the club's official website.
"It's a shame for the lad because I don't think he's in their squad and we were on the verge of offering him first team football."
Despite calls from both McFarland and chairman Mike Bateson, Tranmere refused to back down on their stance, despite the fact Hazell has not been a part of Dave Watson's first team squad since October.
Some good news from Plainmoor is that Ipswich striker Richard Logan has agreed loan terms with the club and will sign on the dotted line on Thursday.
This is to enable The Gulls to maximise his spell in the Westcountry and feature in the clash with York on 12 January.
"He's a useful player, he holds the ball up well and I'm thinking that he'll link well with the new look midfield," McFarland said.
