A referendum on a neighbourhood plan was due to go ahead this week despite a legal challenge from a developer.
Chichester District Council said the Electoral Commission had advised it must proceed with the local referendum on the Loxwood neighbourhood plan, even though Crown Hall Estates had applied for judicial review.
Carol Purnell, cabinet member for housing and planning, said: “We are incredibly disappointed with this action because we know how hard Loxwood has worked on this plan.
“We are taking legal advice on the grounds of this challenge and we will then decide on the appropriate action to take.”
She said the Electoral Commission had concluded that the referendum on 24 July must go ahead.
The plan for the village of Loxwood covers the 2013-29 period and provides for 60 new homes to be built there during that time.
If approved in the referendum the plan would become part of the Chichester district development plan.
Other policies for Loxwood would introduce a defined settlement boundary, design policies to protect the built heritage, and traffic calming. It would also require the use of energy efficiency measures and green technologies in new buildings.
Crown House Estates declined to comment.
Earlier this month a housebuilder, Larkfleet Homes, launched a judicial review challenge to the Uppingham Neighbourhood Plan, claiming it was "flawed in several areas and therefore not legally valid".
In May a High Court judge rejected a challenge brought by three national housebuilders – Barratt Homes, Wainhomes Developments and Taylor Wimpey – to the draft Tattenhall Neighbourhood Development Plan.