The future of the Huntingtree Sons of Rest was expected to be decided last week but the council revealed the community group which takes over the building will have to pay £7,000 for repairs.
The Hasbury Community Association are vying with the Women's Awareness Association to own the building which was built to honour fallen soldiers and left to the townspeople in 1947.
Councillor Gaye Partridge, Dudley Council cabinet member for human resources, legal and property, said: “The council's original proposal was to sell the Sons of Rest building on the open market and to plough the proceeds back into the borough.
"However, because of community interest in the site, and in line with the council's new Community Asset Transfer policy, we have agreed to look at the feasibility of leasing the building to a community group."
She added: “There have been two expressions of interest and both groups have submitted business plans which have been through an initial appraisal by council officers.
"Further information has been requested from the interested groups and if the transfer is agreed, the successful community group will have the responsibility for the day-to-day running costs as well as repairs and maintenance of the building."
Cllr Partridge confirmed the council was not budging over demanding the winning bidder having to foot the repair bill.
She added: “Initial discussions held last year made both interested parties aware that there are repairs and maintenance issues to bring the building back into public use and that in the current difficult economic climate the council does not have the resources to cover these costs.
"A recent condition survey has assessed that just over £7,000 needs to be spent on the building to enable a group to move in, and it is up to the groups to demonstrate how they will meet these costs."
The HCA used Localism Act legislation to halt the sale of the building and the community asset transfer scheme is a new Dudley Council policy.
The Sons of Rest in Hasbury will be the first attempt use the new policy to hand a community asset over to residents to run,
Ian Cooper, chairman of the HCA, said: "After waiting so long for the decision this is not the news that we wanted but it is not all bad news.
"We are just a bit upset that the council has mothballed the building for such a long time and now want us to foot the bill for the repairs."
He added: "We will continue in our bid to take over the Sons of Rest and we are confident Dudley Council will chose our bid for the building."