Plans to alter the building above Zizzis near the Guildhall have been rejected by Kingston Council because they would "harm the character" of the area.
Proposals included adding two one-bedroom flats by building an extension on top of the existing floors.
The High Street building sits in the Kingston Old Town Conservation Area, and is itself marked as a "building of townscape merit" (often known as being "locally listed"), so plans must pass strict guidelines.
In the decision letter, the council wrote that although the harm to the character of the building and area would be "less than substantial", the lack of public benefit from the scheme meant it could not be approved.
Longmead Capital, the investment managing company that submitted the plans, said in supporting documents it hoped to create a "contrast" with older buildings nearby.
The council had issues with the "bulk, scale, design and choice of materials" of the proposals.
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