The council and insurance giant had a previous deal to redevelop the four acre, town centre site.
But the scheme has stalled since the agreement was signed in 2009 and the local authority is now planning its own scheme.
Demolition of the old bus station and office complex at the Greyfriars site is well underway and the site will be levelled and ready to market to developers and retailers by the beginning of December.
Northampton Borough Council will continue with the demolition of Greyfriars and will prepare the four-acre site for development, while seeking a developer to draw up plans for a major retail and leisure scheme.
It is hoped that planning permission could be obtained and work ready to start on the site in autumn 2015.
Cllr David Mackintosh, Leader of Northampton Borough Council, said: “I am pleased the Borough Council is now able to move forward with this development on our own.
“It is time to deliver the improvements that people have been waiting for many years to see, which will strengthen Northampton’s retail offer and keep more spend in the town.
“Greyfriars is a great site and gives us a really exciting opportunity to move forward very quickly with a retail and leisure development, which will create additional jobs in construction and retail and add to the great mix of business, culture, heritage and retail that we already have as a town.”S