A historic Bangor building along the Penobscot River faces demolition again after a deal to save it collapsed, officials said Tuesday.

Officials at Shaw House, a nonprofit social service agency that owns the 125-year-old former Bangor waterworks house, applied for a demolition permit on June 29. That came after the Friends of the Engineer’s House opted out of rebuilding it for $400,000, said local contractor Bob Kelly, who formed the nonprofit.

The deal fell apart when Shaw House officials proposed late in negotiations that Kelly’s group pay $15,000 annually to lease the land, Kelly said. That turned what already was “a break-even deal” — because of anticipated mortgage and maintenance payments and the renovation — into a money loser, he said.

“Originally they offered the house and land for $1. As things developed, they learned that they didn’t really own the land so we could not get it without things getting extra complicated,” Kelly said Tuesday. “They just brought that up at the last minute. We just kind of threw our hands up in the air.”

Shaw House program director Rick Tardiff expressed regret at the need to raze the house but said that the deal died due to unresolved issues and the Friends’ failure to meet a March 31 deal deadline.

“Even after that, we continued to negotiate for almost another two months, but there were several important issues on which we and the buyers were far apart,” Tardiff said in a statement.

The deal’s death likely ends the decades-long struggle to save t he State Street home, which has considerable historic value. Arguably one of Bangor’s pre-eminent architects, Wilfred E. Mansur, designed it in 1892. He did dozens of city buildings but the house, which is named after the people who lived there, is unique in his portfolio.

“It’s too bad because the building is very saveable. We were very enthused about saving it last fall when we first got involved with it,” Kelly said.

Assistant City Solicitor Paul Nicklas cited the work’s cost, the house’s lack of easements needed to cross nearby railroad tracks and a “difficult” timeframe among the reasons talks failed. Nicklas briefed members of the City Council’s Business and Economic Development Committee on Monday.

“It’s a tough situation. You never want to have a historic building torn down,” City Councilor and committee chairman David Nealley said, noting the rehabilitation effort was “difficult from a commercial standpoint.”

Kelly’s group planned to turn the 2,500-square-foot building into offices for Ames Associates, LLC, which specializes in restoring antique homes.

The city acquired the house in 1977. In 2005, it transferred the complex to Shaw House, which redeveloped the main waterworks building into rental apartments.

The building will be razed once the city grants the demolition permit, Tardiff said.