Otley-based landlords Prospect Estates have submitted plans to Lancaster City Council to turn the building into 22-bed accommodation.
But the club are objecting to the application on several grounds, including arguing there is a covenant on the site meaning it can only be used as a social club.
Their submission to city council planners reads: “Lancaster City Football Club wish to remind council planners of the restrictive covenant governing this site that clearly states the Dolly Blue is to be used for nothing other than a social club and steward’s residence for the benefit of the occupier or owner of the adjoining land.
“The proposed change of use within these plans is clearly in breach of that covenant.”
The club are also objecting on the grounds that access to the tavern’s parking spaces is dependant on a right of way from the adjoining car park, belonging to Lancaster City Football Club.
They also say the number of parking spaces outside the Dolly Blue, six, is “insufficient to support a proposal of 22 individual lettings”.
One local resident however has submitted a letter to the council in support of the application, which would see the flats developed within the existing buliding.
The club had leased the tavern until July but it is currently closed and up for sale or rent.
Prospect Estates said they would welcome any interest in the building and are prepared to listen to parties wanting to run it as a pub.