Ministry of Sound has won a battle to prevent a 41-storey tower block from being constructed next to its home of 20 years, amid fears that the development could have led to the south London nightclub's closure.

Southwark council's planning committee last night voted by five to nil, with one abstention, against the proposal – which aimed to build 255 flats directly opposite the club in an area where there has been no residential development previously.

Ministry had feared that if the building had gone ahead, it would have prompted complaints about noise and nuisance from the newly arrived residents. That, club bosses believed, would have led to the club losing its licence and so being shut down.

Oakmayne had offered to "triple glaze" the first 20-30 storeys of flats immediately facing the club, and argued that the venue and residents could co-exist.

Ministry of Sound, which also runs one of Britain's two largest independent record labels from the site, has offered to buy the Oakmayne site to provide alternative development. But with relations between the property owner and the club so combative it is not obvious this will lead to a solution.

Oakmayne chairman Christopher Allen said the developer would consider whether to appeal. He added: "We are both confused and bitterly disappointed by the planning committee's decision, which was made against their own officer recommendations and the weight of expert evidence in support of Eileen House." He said the decision would "cost the people of Southwark" and that "what will remain is a 1960s obsolete eyesore and the area, which desperately needs regeneration, will continue to stagnate".

Lohan Presencer, the chief executive of Ministry of Sound, said that planning committee had arrived at the "correct decision" and said that "now is the time for all concerned to come together to find a positive vision for the regeneration of the Elephant & Castle." The club owner said it would seek a meeting with the developer to try and come up with a new proposal.

Southwark council said that it was keen to see the Elephant & Castle area redeveloped. Councillor Fiona Colley, cabinet member for regeneration, said, "The Eileen House site is a prime location in central London, and in the Elephant & Castle regeneration opportunity area. Any improvement to this area would be of great benefit to local people. We're very keen to see a development go ahead on this site and will be looking into the next steps forward."

London nightclubs often have only short-term existences, with changing land use a perennial threat. The Cross in London's King's Cross closed in 2008 ahead of the wider redevelopment of the site behind the station; Turnmills in Clerkenwell, the first UK venue with a 24-hour licence, also closed that year and is due to be turned into an office block.