West Lindsey District Council is facing a challenge over a decision to refuse permission for 170 new houses in Bardney.
The council initially rejected the application for the homes off Hancock Drive last September.
Developers had applied for full permission for 44 dwellings and outline permission for up to 126 more.
Developers have confirmed they have submitted an appeal.
WLDC vetoed the application on a number of grounds including:
*The development is on a greenfield site and would have an impact on the character and charm of the village;
*Result in substantial harm to the setting of St Lawrence Church and The Manor;
*Increase demand on health and education facilities
*The development had only one access route and restricted road widths.
Developers, though, have hit back and stress they have satisfied many of the concerns.
They say the application would include revised payments to improve public transport, health and education. They point out Highways officials did not raise any objections.
In a report, the council’s chief operating officer admits it would be difficult to defend some of the reasons for rejecting the application and said legal costs could be involved.