The City of Lincoln Council is inviting tenders for a lease to operate The Lawn for three years.
The council tried to sell The Lawn last year, but received only one bid from Lincoln hotelier Jonathan Pass, which was rejected.
Andrew Taylor, Chief Executive of the council, said The Lawn is an important city asset, but it is proving difficult to maintain.
He said: “It is important that we keep the character of the building, and the surrounding grounds must remain open for the people of the city to enjoy.
“Last year we placed the property on the open market but it is a reflection of the economy that it did not attract sufficient bids.
“More importantly, we were unable to achieve the necessary assurances we were looking for with regards to protecting the public open space.
“The property ultimately remains for sale, but in this difficult climate we are realistic about the prospects for this.
“We have, therefore, turned our attention to ensuring that The Lawn continues to be an important part of the offer in Uphill Lincoln, particularly as we approach the Magna Carta celebrations in 2015.
“We are also very mindful of the need to maintain a viable trading environment for the other businesses located at the Lawn .
“We are, therefore, inviting tenders to be submitted for a lease to operate the premises for a three-year period.”
Jonathan Pass, who owns the Charlotte House Hotel on the premises of The Lawn, said: “I’m disappointed that the sale has apparently fallen through.
“Our proposal included a full refurbishment. Anybody going into a three-year lease is not going to invest heavily.
“Our offer of £2 million is still on the table but nobody from the council has come back to us about it,” he added.