The Castle Mona Hotel, in Douglas, will be auctioned again.
It was sold at auction in London to an undisclosed island-based developer in October for a sum said to have ‘substantially’ exceeded the £1m reserve price.
But the Sefton Group has now revealed the sale has not been completed.
The company’s chief executive, Brett Martin, said: ‘For a number of months we have been working closely with a prospective buyer but unfortunately, despite several deadline extensions, they have failed to complete the purchase.
‘Consequently, the board of Sefton Group has concluded that placing the property in auction is the best way to progress a sale and secure the long-term future of the building.’
The site will be listed with Lambert Smith Hampton for auction on Monday, May 14.