Skateboarders on London's South Bank will be able to remain where they are for the long term, conclusively thwarting plans to redevelop their undercroft into shops and restaurants.

Details of a binding agreement between the Southbank Centre and the Long Live Southbank campaign were revealed released on Thursday afternoon. The agreement, which involves both sides withdrawing various legal actions, resolves a battle that has been going on for nearly 18 months, since the centre announced plans for a spectacular £120m redevelopment which could only be funded, it said, by moving the skateboarders further along the Thames.

The skateboarders refused to go willingly and they were backed by London's mayor, Boris Johnson.

Now the Southbank Centre has agreed to keep the space under the Queen Elizabeth Hall "open for use without charge for skateboarding, BMX riding, street writing and other urban activities".

The agreement means the planned refurbishment of the Queen Elizabeth Hall, Purcell Room and Hayward Gallery will go ahead – but there remains a question mark over the Southbank Centre's initial scheme, which involved building a "floating" glass pavilion that would have been able to accommodate a full rehearsing orchestra.

Alan Bishop, the Southbank Centre's chief executive, said the strength of support for the undercroft in its current form was recognised. He added: "We are also still committed to a wider scheme for the festival wing, creating new arts and cultural spaces to provide more free arts and education opportunities for millions of people each year, but in the meantime we need to save the existing buildings."

The Long Live Southbank campaign tweeted: "After 17 months we can announce Southbank is finally saved – a massive thank you to all who stood with us."

The leader of Lambeth council, Lib Peck, said: "I'm pleased that Lambeth council was able to work with both sides and find an imaginative solution to resolve this. Shared public space in London is precious and Southbank Centre is a great asset to the country's cultural life. This agreement is a sensible way of protecting both and we can all now look forward."

Arts Council England has pledged £16.7m towards the £24m cost of sorting out an urgent backlog of repairs and maintenance for the east side of the centre.

The Southbank Centre had wanted to move the skateboarders 120 metres upriver to a space under the Hungerford Bridge. But Lambeth council received more than 27,000 objections to the centre's planning application.

Even the normally friendly neighbours objected. The National Theatre's director, Sir Nicholas Hytner, wrote a devastating 2,683 word formal objection in which he said the size of the development was "dictated not just by the cultural value but also the commercial … so in fact the volume of the building that occludes the view of the National Theatre is largely dictated by the revenue it generates".