A compromise has been reached over the future of Brewin Oaks, the former home of March mayors George and Patsy Brewin.
Planners agreed for the house to be retained and the grounds to be used for eight homes.
It will mean cash could soon be flowing into an educational trust to benefit local young students.
Originally the executors of the estate of Mr and Mrs Brewin wanted to flatten the house and use the land for 41 flats and four houses.
Planning officers thought it acceptable, the planning committee disagreed, and the Planning Inspectorate – on appeal – sided with councillors.
Now a decision, confirmed under delegated powers, has resulted in a fresh application for a much smaller scheme being agreed.
Executors of the Brewins' estate told planners: “This is a reduced scheme with the existing vacant house retained as it is, with a smaller garden.
“The house suitable for extension and conversion into a residential care, nursing home or similar, but this is not part of this application and would be a matter for any purchaser.”
They added: “This is a simple scheme which retains the existing house for possible future use that would benefit the community.
“The scale can have no adverse effects on adjacent occupiers. The scheme will enhance the character of the area, and overcome the planning committee’s previous concerns.”
Justin Wingfield, head of economic growth and assets at the council, pointed out that Brewin Chase is owned by Fenland District Council.
“Although it is acknowledged that Brewin Oaks enjoys certain rights of access, we would require proportionate improvements to be made to a specification equivalent to an adoptable standard at the developers cost.
“We would expect to be engaged directly with the developer or site promoter to discuss and agree specific requirements and/or commuted sums.”
Mr Wingfield said City Road car park is owned by the council and he expected the new development to have sufficient parking within the site for residents and visitors.
A copy of the will left by former Mrs Brewin clearly shows she intended to allow for her town centre home to be sold to benefit future generations of students.
It shows that Mrs Brewin, who died six years ago, was happy for the house and grounds to be sold to raise money for a trust to support students to attend university.
Her will specifies trustees "to sell my real estate" and "convert into money" the proceeds; once funeral and other expenses were met the rest to go to the March Educational Foundation.
Mrs Brewin's will require them to put the proceeds "in a designated fund to be called the George and Patsy Brewin Scholarship Fund to provide for the application of the income in perpetuity" to support students attending university.
Her will dictates that the proceeds will help any student who has attended Neale Wade Academy, March, for at least five years.
It says those benefiting from the trust must also have been resident within March, Doddington, Manea, Wimblington and Stonea for at least five years.
The will also mentions that help can be given to qualifying students studying the sciences including physics, chemistry, biology, medicine, maths, engineering, technology or English or other languages or history of geography "at a major United Kingdom University".
Mrs Brewin, who was a primary school teacher at Dartford Infants and Maple Grove, was also a March town councillor for many years and was once described as the town's answer to Maggie Thatcher.
With husband George, who died in 2008, they owned a shop in High Street which sold everything from christening gifts, birthday memorabilia, jewellery and wedding gifts as well as running Brewins Funeral Directors.
Patsy was mayor of March from 1988-89 and George was mayor in 1975-76, 1981-82, 1984-86, and from 1994-95.
Dozens of protest letters were submitted to Fenland Council opposed to the building of 45 homes at Brewin Oaks, many claiming it was not the intention of the Brewins for it to be sold for development.
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