A bid for a community buyout of the Royal Hospital for Sick Children has been hit by red tape, organisers have said.

A new, purpose-built facility is due to replace the hospital on Sciennes Road next year, at which point it will be renamed.

The site, which dates back more than 150 years, is expected to fetch tens of millions on the open market but nearby residents have attempted to gain first refusal on the site under new community right-to-buy legislation.

The Marchmont and Sciennes Development Trust (MSDT) has proposed transforming the site into a hub for small businesses, affordable housing and a community hall.

It says its application, which was submitted to Scottish ministers in March, has been hit by delays.

It has emerged the four-acre site is owned by two legal entities, NHS Lothian and its charitable trust, the Edinburgh and Lothians Health Foundation.

This means the MDST must submit two fresh bids to ministers, and the suspension of the sale process has been lifted.

It is understood developers have been eyeing the site for luxury flats.

The health board has said talks with those bidding for the site will resume.

A MSDT spokesman said: "This complication is disappointing but not unexpected given it is a complex site and it is a bid that really tests the new legislation.

"We are now focused on definitively determining who owns which parts of the site and submitting the two applications that could ultimately see the community take control of the Sick Kids site when the NHS moves out.

"We have asked the health board and the foundation for help with this task as they hold the relevant title deeds, a move which will benefit all parties as it would speed up the process and get us all closer to a decision on whether MSDT should get first refusal on the site.

"This site remains a dream opportunity to bring this historic hospital under community control."

Jim Crombie, deputy chief executive of NHS Lothian said: "We have been advised that Scottish Ministers have declined to consider the Marchmont and Sciennes Development Trust's application.

"The Trust has contacted us with a request for further information for their application and we will respond directly to them this week.

"The existing process to sell the properties will continue and we will be resuming talks with those who have already bid for the site."