The occupants of the Art Roch hostel yesterday removed barricades which they had put up on Monday, after being given 24 hours to leave the building in the Grassmarket.
They have now been warned by administrators who have taken ownership of the property that they have seven days to quit the premises.
The notice came after police were called out to the hostel for a second time over an incident in which a security guard sent to keep an eye on the property was allegedly thrown out by residents.
It is understood that guests who had booked their stay in advance were still turning up yesterday – and were furious at being told their bookings had been cancelled.
Residents of the backpackers hostel, many of whom are foreigners who have stayed there for months, say they will have nowhere to go if they are kicked out of the building.
Hilary Kernaghan, a resident at the Art Roch, told the Evening News: “I’ve been for a meeting with KPMG, who said they’re going to serve us with a solicitor’s letter.
“They are going to commence proceedings against us, taking the format of a declaration of irritancy. We’ve been advised to seek legal representation.
“Their representative said it will probably be days rather than weeks before we are removed. They aren’t interested in negotiating with us to get more time – we even offered to pay them rent.
“I’ve been advised of some steps we can take, but I still need to discuss everything with the group.”
Police were called to the Grassmarket hostel again on Monday night after another security guard was removed from the premises following a meeting between the residents and Malcolm Scott, pictured right, who opened the hostel in 2010.
It was reported earlier this year that the building’s owner Prestonpans Trading Ltd – of which Mr Scott is listed as a director – had gone into administration.
Ms Kernaghan added: “It got a bit messy with this chap being thrown out.
“He was told to leave and he didn’t want to, so he was lifted out of the building. The police did come and take statements.”
A spokesman for Lothian and Borders Police said: “We were called again around 10.15pm on Monday but it was a civil dispute so there is no criminal complaint.”
Ms Kernaghan continued: “The woman from KPMG also told me that Lothian Hostels are sending two security men round to stay in the hostel tonight. I do accept that there is a security risk, and I know that they just want to make sure the building is safe and that it’s not taken advantage of now more people know about the situation here.
“However, I am concerned that things might get ugly again between the security staff and the other residents.”
Though the door is no longer barricaded, residents are taking turns to keep watch and ensure only those who are staying there enter and leave.
Ms Kernaghan said: “We have people showing up at the door all the time who have booked to stay here and we keep having to turn them away. Some of them have become very angry.”
KPMG said it had no statement to make at this time.