Residents are cracking open the champagne after a council refused to approve the conversion of an office into affordable housing without planning permission.
Epsom Council has refused "prior approval" for the conversion in Chessington Road, West Ewell, due to traffic safety issues.
Planning permission was not required for the change of use unless the council identified transport and highways, contamination or flood risks.
Paragon Community Housing Group wants to turn Bytes Technology Group’s former HQ into 10 flats and a three-bedroom house which may be social housing.
But the council decision, dated April 15, said: "The proposed change of use of the offices to residential flats would introduce unacceptable highway safety concerns for the residents of the flats.
"The building fronts a busy B class road but has no footway or margin to allow residents to cross the road safely."
In an email to neighbour Brian Angus, a planning officer said: "The application has been refused and therefore full planning permission is required."
Mr Angus, who opposed the plans, said: "We are cracking open the champagne. I will be inviting all the neighbours round.
"There will now have to be proper discussion with the community and neighbours about changes to make the best use of the building."
Worried residents had feared the planned conversion would result in "tiny unhealthy rooms" and put pedestrians in danger.