The news follows a formal offer to the owner by the Enterprise and Environment Committee in November.
It was decided that if the offer was declined, compulsory purchase proceedings would be undertaken and the matter reported to Council no later than 14 March 2013.
Councillors were then told an offer had been made but rejected by the owners.
The Council's Housing Strategy identified Alva town centre as in need of regeneration.
The Clackmannanshire Local Development Plan will also include the provision of affordable and social housing.
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Council Leader, Councillor Gary Womersley said: "It is perhaps not surprising that the offer has been rejected, given that the owners appear to have a very inflated view of the current value of their property. It has been suggested to them that they should consult their own professional advisers and in particular obtain their own valuation of the property from surveyors experienced in the valuation of local commercial property.
"The former Alva Glen Hotel has become a dangerous eyesore and there is little to be gained in prolonging unproductive negotiations if the Council is prepared to go down this route. Further evidence of the continuing deterioration of the condition of the building is the recent direct action the Council has taken in respect of a dangerous chimney on the property."
"That said, given the amount of time that the Compulsory Purchase process can take, we have agreed to make a compulsory purchase order at an early stage whilst in parallel continuing to seek to acquire the property by negotiation. As such, we have left the door open if the owners change their minds and decide to sell."
(IT/GK)
