Northminster said it has doubts that the Spark:York scheme meets national planning policy guidelines for conservation areas.
The developer submitted plans for a 146-bed hotel last month after more than two years’ detailed discussions with City of York planners and English Heritage.
Northminster‘s managing director George Burgess said: “The concept of creating a Spark:York scheme to support business start-ups is laudable but wholly inappropriate in a conservation area and at odds with the local authority’s wider aspirations for the regeneration of the ‘Castle Gateway’ to the city centre.
“The Spark:York plan proposed for 17-21 Piccadilly is on land owned by City of York Council and must be subjected to the same rigorous scrutiny under local and national planning policy as any development submitted for this historic part of the city.
“There are far better uses for this site in terms of architecture, job creation and income generation for the local authority and, in spite of the considerable investment we have made so far, we may place our hotel scheme on hold until the threat to this part of the city is removed with the rejection or relocation of the Spark:York scheme.”
Planning policy for conservation areas stipulates that long-term viable uses should be found “to protect and enhance heritage assets”.
A spokesman for Spark:York said: “We’re a little surprised by Northminster’s threat, as we believe Spark:York will become an exciting destination for both locals and tourists alike, enhancing the experience of Northminster’s hotel guests.
"With two large hotels already on this street, Spark:York will bring a completely new experience to the city, as enjoyed in other places across Yorkshire such as Trinity Kitchen and Belgrave Canteen in Leeds, or Krynkl in Sheffield. There is overwhelming support in favour of Spark:York and we’re grateful to the local community who are desperate for this in York.”
The council said it would be inappropriate for it to comment on the dispute.