The 50-year-old cannot be named for legal reasons but appeared via video link in Tamworth Local Court on Friday morning from the cells at the Tamworth police station.

He was arrested at the scene on Warral Road on Thursday afternoon, after a blaze erupted in the unit just before 3pm.

Legal Aid solicitor Rachel Karrour told the court the allegation was that her client "lit his cotton jumper" which sparked the fire.

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"It's alleged that he lit his apartment," she told the court.

Police prosecutor Sergeant Rob Baillie told the court "there was a lot of damage".

"It was owned by Homes North," he said.

Miss Karrour made an application under the Mental Health Act to have her client taken to hospital for assessment. She said she had been able to gain instructions on the application, and if he was released, she could lodge a bail application at a later date.

The 50-year-old is accused of damaging property worth more than $15,000 by fire after the blaze ripped through the West Tamworth unit, but was not required to enter a plea to the charge.

The court heard the accused had other matters before the court after being served future court attendance notices. He faces charges of larceny, fraud and damaging property.

"He's bail refused on one matter only," Miss Karrour said.

A letter to the court from a family member said the accused could live in Newcastle with family "and have that extra support", Miss Karrour told the court.

After hearing submissions in court, and examining the police facts, magistrate Peter Thompson said he would make the order for the accused to be assessed at Banksia House in Tamworth by doctors.

He said if the accused "was well enough" to be released, he could return to court and lodge a bail application because "there is some options to stay with family in Newcastle"

The accused said: "Ok, thanks".

The ground-floor unit at the Warral Road complex was severely damaged in the blaze, and a unit next door was affected by smoke and water, fire crews confirmed on Thursday afternoon.

The case will return to court at a later date.