Architect Frank Gehry will be forced to redraw his £290 million scheme for the seafront.
Last night Brighton and Hove City Council emphasised that the controversial plan for the King Alfred site in Hove would not to go ahead in its original form.
Instead, developers Karis will have to submit a revised application to the council's planning department.
The design team, led by Mr Gehry, will have to rework the planning application to ensure it conforms to the demands of the Government's chief advisers on heritage and the environment.
Both English Heritage and the Commission for Architecture and the Built Environment (Cabe) had said they could not support Mr Gehry's original vision because it failed to ensure the building would be seen as an integral part of Hove.
The advisory bodies, between them guardians of much of England's public space, said the sports and housing complex would not fit in with the rest of the seafront.
Karis has not revealed what changes it was planning to convince the two bodies that the scheme was still workable, taking into account their criticisms.
Proposed revisions have been delivered to the Dutch headquarters of financiers ING but Karis could not say when a final decision was expected.
At a meeting of Brighton's policy and resources committee last night, Conservative councillors said they were dismayed at the continuing uncertainty surrounding the development.
They demanded a full report on what was happening with the scheme to be presented to the next committee meeting in July. They said the public had a right to know if the scheme was still a viable option.
The committee considered comments by the council's chief executive Alan McMarthy which rubbished a report released earlier this year by the District Valuer that claimed the King Alfred scheme was not financially viable.
The District Valuer's Office, part of the Inland Revenue, cast doubt over the multi-million pound development. It warned the project could run as much as £29 million over budget and taxpayers would have to stump up a significant proportion of the £36 million cost of the leisure complex.
In a report to the committee, Mr McCarthy said the District Valuer has been working with "benchmark" figures which were different from the actual project costs provided by leading surveyors and verified by the council's own consultants.
However, Deputy council leader Sue John, speaking on behalf of the authority's cross-party King Alfred project board, revealed the scheme as it stands would no longer be considered by the council.
She said: "The design team, led by Frank Gehry, have undertaken further work to address the concerns raised.
"It is unlikely that the council will be asked by the applicant to determine the current planning application."
Coun John said a further report would be given to the committee when a more definitive statement could be made.
Leader of the opposition Brian Oxley said: "We are still in a situation where there is a lack of clarity and a planning application that can't go forward.
"Residents are left wondering what on earth is going on.
"There is a huge element of doubt about the present scheme and widespread opposition within the locality.
"It doesn't do for us to be having a report at some future time. It is absolutely vital it is presented at July's meeting."
Coun Garry Peltzer-Dunn seconded the amendment and also criticised the substance of the chief executive's report.
To applause from the public gallery, he said: "It was so one-sided. It was a case for opposing everything that had been said by the District Valuer."
Mr McCarthy said: "This is the modern planning process in action.
"We ask experts like Cabe and English Heritage for an opinion, they provide one, and that's taken on board by the developers with a view to improving the scheme.
"And while these bodies had reservations about aspects of the current design, they didn't question the notion that a scheme could still be delivered.
"That's what the developers are working on right now, although they're not yet in a position to show detailed drawings."
Karis said there was nothing wrong with the design principles of the project.
A spokeswoman said both Cabe and English Heritage were fine with the majority of the scheme and a small redesign could be made in response to the bodies concerns.
Karis managing director Josh Arghiros said: "Karis and ING are confident as a joint venture company of moving forward with the project."
Earlier this month The Argus reported that the towers at the heart of the development would have to be 12 metres higher than envisaged if the scheme was to go ahead.
Piers Gough, architectual adviser for the King Alfred project, has said increasing their height was the only way of ensuring the surrounding low-rise buildings could be reduced in size - a stipulation of English Heritage and CABE.
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