Owners Seemore Properties had asked the council for permission to knock down the old hospital off Quernmore Road, saying it was being targeted for vandalism and looting.
However, the council refused their request due to insufficient information regarding environmental impacts in the proposal.
The hospital, which closed in September 2016, has been vacant for many years.
Birmingham-based Seemore Properties bought the freehold interest of the hospital in November and had argued that the re-use of the buildings was not financially viable.
Although it wanted to knock them down, it has not yet sought permission to build a new development in its place.
The application for demolition said: “Having assessed the condition of the buildings following the period of vacancy, looting and general vandalism, Seemore Properties consider that the re-use of the buildings is an uneconomic proposition.
“The looting and vandalism occurred notwithstanding the site security employed by the NHS Trust to deter such activities.
“The vacant and disused buildings present an ongoing security risk and a liability as a result of the potential for further unlawful breaking and entering and vandalism. It is the intention to demolish the buildings.”
The buildings are not listed, although an urgent decision was made on Friday for the Lancaster Moor Hospital to be designated a Conservation Area as a result of the demolition plans.
Seemore said that after demolition, the site would be left level, stable and secure to prevent the illegal occupation of the site, and the existing security fencing would remain.
If the demolition request had been approved, work would have begun on taking down the former hospital in March, with a completion date of June 30.
Seemore Properties said it would recycle any material that was eligible, sending off anything that cannot be recycled to be disposed of at the Suez facility off Ovangle Road in Lancaster.
The council said the proposals had insufficient information on how the demolition would impact the habitats of protected species of bats and protected trees that surround the site.
Built in 1916, Ridge Lea Hospital was originally designed to be a separate women’s unit to the nearby Lancaster Moor mental asylum. It went on to become part of the Lancashire and South Cumbria NHS Foundation Trust as a mental health hospital.