It is one of London's most exclusive addresses. Michelin-starred restaurants are just a block away, the US embassy is around the corner and Hyde Park is at the end of the road. To share the same postcode ought to cost millions.

But the new residents of 18 Upper Grosvenor Street, a raggle-taggle of teenagers and artists called the Da! collective, haven't paid a penny for their £6.25m, six-storey townhouse in Mayfair.

The black anarchist flag flapping from the first-floor balcony gives a clue what they are up to: since finding a window open on the first floor on October 10, the group has been squatting in the house, and only plan to leave when evicted. This might take some time: after almost a month, the deed owner — a company called Deltaland Resources Ltd, according to the Land Registry — doesn't appear to have noticed that the once-opulent building has been taken over.

The 30-plus rooms of the grade II-listed residence are now scattered with sleeping bags, mattresses, rucksacks spilling over with clothes and endless half-finished art installations. One room is full of tree branches while another hosts a pink baby bath above which dangle test tubes filled with capers.

They had been watching the building for "at least six months" before they decided to try moving in , said one member, Stephanie Smith, 21. "We had put tape on the keyhole and kept looking through the letter box to see if anyone had been there." Then, one October night, five of them decided to go in. Some wore high-visibility jackets to look like builders; Smith had a clipboard and fur coat. They propped their rented ladder up against the front of the building, and one man climbed on to the balcony.

"I went across to the window and I couldn't believe it when it was unlocked," said the squatter, who declined to give his name. " It was a really exciting moment."

Almost a month since the occupation began, no one from Deltaland Resources Ltd, which is registered in the British Virgin Islands, has been in touch. Meanwhile the locks have been changed. The Da! group has reconnected the utilities and says the bills will be paid.

Smith insists they have done nothing wrong. "Squatting is not a criminal offence, it's a civil matter," she said. "If the owners want to kick us out they will have to apply for an eviction notice. If anything, we are improving the building by mending leaks and things like that."

The group has had a mixed reception from the other residents of Upper Grosvenor Street. "Our next-door neighbours have been really nice; they've even let us use their wireless internet," said Smith. Another neighbour, a man called Alexander, has offered the services of a cook. But not everyone is happy. Jacques Dejardin, manager of a restaurant run by Michelin-starred chef Richard Corrigan, which was due to open last night, was horrified to discover this week it was directly opposite a squat.

" It's rather bewildering. When you move into an address like this you don't expect to have squatters as neighbours," Dejardin said. He needn't worry about the squatters popping in for dinner, though: they are firm devotees of freecycling and collect all their food from supermarket skips.

• This article was amended on Friday November 7 2008. It was replaced by the version that appeared in later editions.

Squatters' sites

• In 2001, a £1.5m London house owned by former BBC chairman Gavyn Davies was taken over by squatters for 10 days. The uninvited guests annoyed neighbours with incessant bongo-playing.

• In 1993, 10 squatters moved into a house in west London belonging to the Sultan of Brunei. Though there were photographs in the property of the sultan with the Queen, the squatters said they did not knowwho owned the house until efforts to evict them were taken on behalf of "the government of His Majesty Sultan Haji Hassanal Bolkiah, Sultan and Yang Di-Pertuan of Brunei Darussalam".

• Last year Harry Hallowes, then 70, drew international attention after he became legal owner of a piece of Hampstead Heath, north London, where he had lived rough for more than 20 years. He was handed the deeds, worth £2m, after developers threatened to evict him.