A legal battle is being fought to save the Victorian house where Sir Arthur Conan Doyle wrote The Hound Of The Baskervilles.
A High Court judge was told today that Undershaw, located in a four-acre site at the Hindhead Crossroads near Haslemere, Surrey, is facing demolition and conversion.
The building has been seriously neglected by the current owners, who view it as a "development opportunity", said a QC.
Conan Doyle scholar John Gibson, backed by many literary celebrities, was asking Mr Justice Cranston to quash Waverley Borough Council's decision to allow the Grade II-listed building to be divided into eight separate homes.
Paul Stinchcombe QC, representing Mr Gibson, founder of the Undershaw Preservation Trust, said there was strong public support for preserving Undershaw as a heritage asset because of its literary and historic importance.
It was the house in which Conan Doyle resurrected Sherlock Holmes, one of the most recognisable fictional characters in the world, in The Adventure Of The Empty House.
The author designed Undershaw and lived there from 1897-1907, completing 13 Sherlock Holmes stories in that time, including his most famous work The Hound Of The Baskervilles.
Despite its literary importance, Waverley Council issued decision notices in September 2010 allowing current owner Fossway Ltd permission to redevelop the property.
It had been used as a hotel since the 1920s before being left empty in 2005 and falling into disrepair.
Mr Stinchcombe said the Fossway scheme involved using concrete blocks to divide Undershaw into a terrace of three houses.
The proposals also included some demolition and the erection of a new three-storey east wing to provide five new townhouses and the conversion of the stable block into garages.
The QC argued that the planning authority had failed to give proper consideration to a third party offer to buy the property so that it could once more become a single dwelling.
He said Undershaw was sold to Fossway in February 2004, the last hotel tenant vacated it in May the following year and it had remained unoccupied ever since.
Fossway was a limited company based in the Virgin Islands that had bought Undershaw as a development opportunty.
Mr Stinchcome said: "There was serious neglect by the owners of this building."
Its condition deteriorated rapidly through water coming in following the theft of lead from the roof and lack of security.
The council ordered urgent works in 2006 which stopped further deterioration, and recovered nearly £75,000 from Fossway to cover the cost.
A repairs notice was served in November 2008 but was not complied with by Fossway, said Mr Stinchcombe.
The council had power to serve a compulsory purchase order but instead decided to negotiate with Fossway, even though it had rejected the company's previous applications for planning and listed building consent to divide up the property into separate homes.
Mr Stinchcombe said there were 1,360 objections to the Fossway proposals, including from the Victorian Society and local MP Jeremy Hunt, the Culture Secretary.
Other objectors were Sir Christopher Frayling, ex-chairman of the Arts Council, and Julian Barnes, who set his Booker Prize-nominated novel Arthur And George in Undershaw.
They also included writer Ian Rankin and writer and broadcaster Stephen Fry.