Camden Council is to force developers to restore historic Athlone House to its former glory after the Victorian house was saved from demolition this week.

In what has been hailed a landmark victory, an appeal to replace the former hospital on the fringes of Hampstead Heath with a £80million neo-classical super-home was dismissed by the Planning Inspectorate on Monday.

It marks a jubilant end to an impassioned six-year battle to stop the house’s demolition, waged by nearly 5,500 campaigners – including Monty Python legend Terry Gilliam.

A victorious Michael Hammerson, who led the fight to save the mansion at the head of the Athlone House Working Group, said: “This is a hammer blow against the developers. The relief is enormous. It has been a shadow over our heads for many years. Would it be too much now to expect the developers to come to us and discuss a proper restoration campaign?”

Hollywood director Mr Gilliam, of Highgate, congratulated the Highgate and Heath&Hampstead societies for leading the campaign, and said: “It is fantastic news that the planning inspector has dismissed the appeal to demolish this wonderful historic house on the fringes of Hampstead Heath.

“I was appalled that the owner tried to wriggle out of his legal obligation to restore the building which is why I became involved.”

Developer Athlone House Limited was obligated to restore the mansion under an historic planning agreement when planning permission for luxury flats in the grounds of Athlone House was granted back in 2004.

Camden Council has been unable to enforce the agreement ever since because of a legal loophole.

But in a damning blow for developers, Mr Ball ruled that the obligation “cannot be so easily set aside”, despite the high costs of restoring the house. He wrote: “The essential commitment is to refurbish Athlone House and there is a clear prospect of enforcement of that through injunction.”

Cllr Phil Jones, cabinet member for regeneration, town and planning, has asked council officers to start enforcement action. They were in discussion with lawyers about how to progress as the Ham&High went to press.

Community groups have been fighting attempts to knock down the house since 2009. Developers appealed to the Planning Inspectorate last year to knock down the house after Camden Council did not rule on the plans in time. Latest designs by architect Robert Adam were described by campaigners as an “Arabian nightmare” and “Stalinist wedding cake”.

Following Monday’s decision, dozens of residents and society stalwarts emailed the Ham&High and took to social media to describe the result as “wonderful”, “fantastic”, and “excellent news”.

Haringey’s Highgate councillor Liz Morris said: “This is a decision with national implications that will strengthen section 106 agreements across the country, so heritage assets cannot be torn down by greedy developers who renege on their legal obligations.”

A spokesman for Athlone House said: “This is a very disappointing decision. We will be looking carefully at the inspector’s decision before deciding the next steps.”