The Duchy of Lancaster, which manages the Sovereign’s land, estates and assets, wanted to renovate and alter the use of a cottage within the grounds of Tickhill Castle. The scheme also includes converting the stables into a single property.
The application was deferred at a previous meeting for a structural report on the building. Principal planning officer Gareth Stent said the building was 'structurally sound' after an inspection by the council's building control team in 2016.
But councillors on the planning committee went against the recommendation of planning officers and rejected the plan on the basis the scheme it was detrimental to the nearby castle.
It's understood the Duchy of Lancaster will appeal the decision.
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Graeme Chalk, on behalf of the Queen's estate, said he wanted to reiterate the application was not an excuse to flatten the structure and rebuild it.
But resident Barry Moss spoke out against the application and disagreed that the building was structurally sound.
Tickhill councillor Martin Greenhalgh also spoke in opposition to the plan and revealed the Secretary of State for Housing, Communities and Local Government had been informed of the Duchy's plan.
He said: "Mr Moss was kind enough to show me around the site and I intend to agree with the dereliction of the building but that's only hear say from my point of view.
"A letter was sent to the Secretary of State some two and a half months ago. This is important to say because they are looking at the case and are interested in the case which depends on what judgement comes of the application.
"The department does have the power to intervene and review the case being granted by the state inspectorate. As a councillor representing DMBC, it might be prudent to allow this to go to appeal by the Duchy of Lancaster by refusing this because we wouldn't want as a council to seem to endorse something which could very well act in all proportion and be dealt with at a different level."
Five councillors voted to refuse the application, three voted in favour.