Edinburgh-based developer AMA wants to knock down Belford House and Douglas House on Belford Road and replace them with 48 apartments and an office.
However, it has now emerged that Unison, which co-owns the Edwardian-era Douglas House, will not sell its stake in the building, which it uses as one of its main Scottish offices. Union chiefs said that, given that they do not intend to sell, the proposals are "academic".
The lack of willingness to sell could force developers to change their plans - despite council planning officials recommending that the controversial scheme, which received dozens of objections from local residents, gets the go-ahead.
In a letter submitted to planning chiefs, John Cole, head of contracts and property at Unison, said: "Unison own Douglas House. We have recently invested in a refurbishment project in order to provide good quality office accommodation to Unison staff at this address for the foreseeable future.
"We feel the location is strategically important to the work of the organisation in Scotland. We do not intend to sell the property, therefore the proposal should be academic."
AMA originally launched its plans in the summer of 2009 but it scaled back its proposals due to concern from residents.
The new plans made the building one storey smaller and further away from an existing neighbouring apartment block.
Dr Ali Afshar, director of AMA, said: "We own almost half of Douglas House but that issue has not been resolved.
"We have not approached them but it is immaterial if we do not get (planning) consent. They may have that view but the development could still be done in two stages without including Douglas House, so they could still stay on site.
"We included Douglas House because we believe the wider aspect of any development should be considered when proposing a new development."
The West End Community Council said that, despite some of its original objections being addressed, the amended proposal, including the loss of Douglas House, will still have a "critical" impact on the surrounding conservation area.
In a report for councillors, who were set to make a final decision at a planning committee meeting today, John Bury, the council's head of planning, said: "Although the retention of part of the building is preferable, policy states that under certain circumstances, where the public benefits and merits of an alternative proposal outweigh the loss, demolition may be justified.
"Having considered the options for retention and the merit of replacement, the demolition of the building is, on balance, justified."