The deal paves the way for Morgan Sindall construction to build a 125,000 sq ft of offices in Brixton town centre and up to 275 new homes.

The ‘Your New Town Hall’ project will also preserve the historic town hall while reducing the council’s core office buildings from 14 to 2, saving at least £4.5m a year.

Muse will now press ahead with the detailed design of the project and carry out widespread consultation with Lambeth residents.

Michael Auger, development director at Muse Developments, said: “We are very excited to be on board with such a major regeneration project; we want to create something that everyone in the borough can benefit from and which adds even greater vibrancy to Brixton’s thriving community.”

Cllr Paul McGlone, Cabinet Member for Finance, said: “This development agreement gives the green light to a project that will bring enormous benefits for all Lambeth residents. Your New Town Hall is a great deal for Lambeth taxpayers and businesses.

Tony Dixon, Managing Director of Morgan Sindall’s London and Aviation businesses, said: “The combined capabilities of Morgan Sindall Group offer elegant, cost effective solutions for our customers. We are committed to providing exceptional assets for Lambeth Council.”

A planning application is expected to be submitted by January 2015, and if planning consent is granted, work is due to start in summer of 2015.