Plans to demolish the village hall in Great Gonerby and build six bungalows were refused by South Kesteven District Council on Tuesday.
As part of the application concerning Memorial Hall in Marratts Lane the developers submitted a Section 106 agreement that they will provide a commuted sum for the construction of a new village hall and sports pavillion on the playing fields at Belton Lane.
This agreement also outlines that demolition cannot take place until the new hall and facilities are certified as complete and available for use by the community.
Conditional approval had previously been granted to build four bungalows on Marratts Lane, but the new plans for six have been submitted as extra funds are required to build the new village hall.
However planning committee members and the public raised concerns about overcrowding and the design of the bungalows, particularly the lack of light.
Geoff Turner, a resident of the existing bungalows on Covill Close which back on to the site of Memorial Hall said: “The close grouping of housing would be oppressive.
Chairman of the committee Coun Martin Wilkins said: “Six properties are needed to raise the finance for the village hall but six is too much.”
“We are all sympathetic to the cause,” he added.
The reasons stated for refusal were the ‘overbearing development’ and ‘poor design’, with 14 voting for the refusal and one against, although members encouraged the applicant to come back with a different design.