The Versailles-influenced Oldway Mansion needs repairs estimated at £1m
The company redeveloping Plymouth's Royal William Yard has been selected as the preferred contractor to revamp one of south Devon's best known buildings.
Oldway Mansion, owned by Torbay Council, needs £1m-worth of repairs.
Urban Splash has been chosen to come up with a plan for the building to include a hotel and affordable homes on the 17 acres of land in Paignton.
It has a year's exclusivity to develop a scheme. If approved, it will get a long lease build it, the council said.
Oldway Mansion was commissioned by Isaac Merritt Singer, the founder of the sewing machine company, in 1871. It was completed just after he died in 1875.
It was rebuilt and extended, with much work being carried out on it to model it on the Palace of Versailles.
It remained the Singer family home until the end of the World War I, when it was used as a hospital.
During World War II it became home to RAF cadets undergoing air crew training, after which it was sold to the town's then council for about £45,000 in 1946.
The Grade II listed building has been used for council offices ever since.
Torbay Council had considered selling it several years ago, claiming it had become too expensive to maintain. The sale plans were criticised by local residents.
The new plans have also been criticised because of the possible loss of facilities in the town.
Both a local bowls club and the Oldway Tennis Centre could be affected because they are in the mansion's grounds.
Keith Johnson, of the tennis centre, said: "People expect to find us here.
"We're a tourist industry, we deal with local people, student groups and holiday-makers.
"If this goes, there'll be nothing else. Not in this town anyway."
The council said of the new redevelopment plans: "The move aims to safeguard the future of Oldway Mansion as well as maintain and improve public access to the grounds wherever possible."