The government confirmed on Thursday that the land council did not have the legal right to proceed with the project until a decision was made on whether the troubled organisation would placed into administration. 

It has also emerged the deal would need the green light from the NSW Aboriginal Land Council, which was not consulted about the plan before it was revealed in the Newcastle Herald. 

Awabakal board member and former deputy chairman Richard Green has been driving the joint venture with Advantage Property Experts Syndications, a Sydney company led by Rockdale man Hussein Faraj with links to Newcastle construction company Buildev and with "money" coming in from China and the Middle East. 

It would use the entirety of the Awabakal's land portfolio - including a proposed residential subdivision at Warners Bay - to develop 450 new housing sites.

The profits would be channelled into the refurbishment of the post office as a convention centre celebrating Aboriginal culture. 

Last week the council, which has been plagued by in-fighting, abandoned legal action in the Land and Environment Court against the Minister for Aboriginal Affairs Leslie Williams, after she asked it to show cause within 21 days as to why an administrator should not be appointed. 

However Mr Green’s solicitor was insistent that under the terms agreed upon by both parties, the deal could still go ahead before October 7 if approved by the board and Awabakal members. 

That appeared to be in direct contradiction with a spokesperson for Minister Williams, who said any transfer of land would "breach the Land Council's undertaking currently in place not to dispose of or otherwise deal with its land assets." 

"The council's undertaking to the court remains in force until 7th October," she said. "Any transfer of land by a land council requires the approval of the NSW Aboriginal Land Council and without such approval the transfer would be void under the act."

A spokesperson for the NSW Aboriginal Land Council said the plan was yet to come across its desk. 

Separately, RPS Newcastle has been working pro-bono for Awabakal for several months, managing an expressions of interest process for a joint venture partner to redevelop the post office. 

Cultural Heritage Manager Tessa Boer-Mah admitted she was in the dark about the proposal from Advantage Property Experts Syndications until contacted by the Herald last week and had since asked Mr Green to give her the documentation so it could be considered among the other offers. 

She denied the proposal might torpedo the work her organisation had done so far. 

"I've requested that Mr Green put in the details...essentially the concept design and all the other things put in through an expressions of interest process,” she said. “It has to go through a due diligence process.” 

Property Council of Australia Hunter Director Andrew Fletcher was also hesitant to give the plan his blessing. “The strategy seems sound enough, but the devil is always in the detail.”

“The Warners Bay land would require rezoning and major infrastructure provision before any new land releases. That’s at least a 5 year process,” he said. 

Mr Fletcher said 450 new homes would represent about 20 per cent of the Hunter’s annual supply, so it would take a decade or longer before the investor would see any returns. 

“Nobody believes the Post Office can wait another ten years for the money,” he said. 

Mr Fletcher said he presumed the company would make an immediate cash payment to Awabakal to restore the post office in return for the development rights at Warners Bay, but that might have to be as high as $20 million dollars to re-purpose the building. 

The neighbouring Koompahtoo Aboriginal Land Council was in administration for seven years before it was dissolved in 2010, at a cost of more than $1.5 million.