Four cabinet members – none from the Loanhead ward – last week approved the plans, hidden away in a housing strategy report.
Loanhead and District Community Council is now seeking an urgent meeting with councillors.
And the local authority's ow
n performance scrutiny and audit committee has 'called in' the matter.
When The Advertiser broke the news to community council chairman Pat Kenny, he said: "I am absolutely dumbfounded."
Loanhead councillor Owen Thompson (SNP) told The Advertiser it was by chance he found out what was happening: "I just picked up the cabinet agenda and it would not necessarily have jumped out at me. It was only because I sat in on the cabinet meeting it was obvious."
But Peter Boyes (Lab), deputy council leader, said: "A decision to use the site of Loanhead Town Hall, along with the former primary school and community education buildings sites, for residential development, was taken in private at a meeting of the full council on October 28, 2008, at which 16 of the 18 members were present.
"The issue was considered in private because it was part of a wider report including a number of confidential, commercial issues.
"Further to that decision, this week's report to Cabinet recommended that the town hall be demolished.
"This report also included matters of commercial confidentiality and was considered in private."
Full story in this week's Advertiser - on sale now.Should this decision have been taken in private? Add your comments below.