A Victorian asylum highlighted by Prince Charles as one of the nation’s architectural gems could be compulsorily purchased amid fears the property is being left to rot.

Planners say the grade II* listed North Wales Hospital in Denbigh has suffered “neglect” as well as being targeted by vandals and thieves and is now in an “extremely dilapidated state”.

Denbighshire officials want to buy up the site to protect it from further damage after talks with its owner, Preston-based solicitor Ayub Bhailok, went nowhere.

A report by Denbighshire’s planning chief Graham Boase to go before councillors today said, since the hospital closed in 1995, one owner after another has failed to secure and repair the main listed building.

Mr Bhailok’s firm, Acebench Investments, bought the site around a decade ago and was given permission for a housing development which would have retained the property’s historic facade. But this has since lapsed after it is believed the recession put the blocks on Mr Bhailok’s scheme.

Mr Bhailok, who in 2001 was fined £10,000 by the Law Society for breaking money rules and found guilty of “conduct unbefitting a solicitor”, has transferred ownership of the site to another firm, Freemont (Denbigh) Ltd.

This is based in the British Virgin Islands – an offshore tax haven.

Mr Boase says talks are ongoing with Mr Bhailok’s agent, but in the meantime the council should start compulsory purchase action.

His report reads: “The fact is that without compulsory purchase action now the condition of Denbigh Hospital is likely to continue to deteriorate and there seems little prospect of the listed building being restored, or the site being brought back into productive use, for the foreseeable future.”

Denbighshire served an “urgent works notice” on Mr Bhailok in June 2011, but ended up paying for £900,000 worth of repairs itself.

Debt recovery is said to be “ongoing”, while in May another repairs notice was served for works to the “most important part of the main listed building”, but without any “satisfactory response”, says Mr Boase’s report.

Once they have bought the site, Denbighshire want to transfer ownership to the North Wales Building Preservation Trust (NWBPT). This aims to ensure the main listed building survives by selling off land on the hospital site for commercial and residential properties.

Prince Charles’ charity, The Prince’s Regeneration Trust, has prepared a business case for the site, which maintains it can have a future once in the ownership of the not-for-profit NWBPT.

The Prince’s charity became involved after he visited the site in 2004 and spoke of the “destruction” of the building’s Victorian character and called its decline “heartbreaking”.

In a letter to Denbighshire chief executive Mohammed Mehmet on July 12 this year, the operations director of the Regeneration Trust Biljana Savic said the authority was right to go down the compulsory purchase route. She warned the “key listed building was at the point of being lost forever” without intervention.

Conservationist Michael Tree also believes a compulsory purchase represents the only way forward for the hospital site.

Mr Tree, a trustee of the Georgian Group and the Wales chair of the Historic Houses Association, said: “Denbigh Hospital has been neglected for far, far too long. Every year that goes by means extra cost to conversion. What we’ve seen is nothing happening there for many, many years and there’s no excuse for that.”

Only the finest listed buildings, around 7%, have Grade II* status. The property, which is on the buildings at risk register, has 4-500,000sq ft of floor space, is six storeys high and set in generous grounds.

In 2008 a suspected arson attack saw a fire tear through its historic ballroom before it was demolished.

It was built as a mental hospital between 1846 and 1848 and has been described by Welsh historic monuments agency Cadw as “the finest purpose-built hospital in Wales”.

The site was closed after being gradually wound up following the Conservatives’ introduction of care in the community in the 1980s.

Mr Bhailok was unavailable for comment.