The charity Praxis Care has been told by the Northern Ireland Office there is no possibility it will receive compensation after being evicted from premises in Hillsborough Castle.
The charity, which works with a range of vulnerable people, including those with mental and physical disabilities, has operated the Secret Garden café and its kitchen garden, staffed by beneficiaries, since 2003.
The charity has been told that it must leave the site, which is the Queen’s official residence in Northern Ireland, because responsibility for the castle’s management is being passed to the charity Historic Royal Palaces.
A spokeswoman for the NIO said it was sad that the café would have to close, but noted that the charity had in effect had use of the site rent-free throughout this time.
Nevin Ringland, chief executive of Praxis, which had total incoming resources of £27,159,286 in the year to 31 March 2012, said that the previous Labour government had arranged for a 10-year extension of its lease, taking it to 2020, but this was never signed.
Since then, said Ringland, the charity had not been told clearly by the government what would happen to the site and first learned that HRP would take it over from a newspaper in November. The charity had spent £400,000 on developing the café and garden facilities, he said.
In February, the charity said it would seek negotiations with the NIO over its position.
"I don’t have a problem with HRP coming in with the expertise it has, but what I can’t understand is why this concept of big society can’t accommodate us," said Ringland. "We feel we are bending over backwards, and Theresa Villiers, the Secretary of State for Northern Ireland, has dug her heels in.
"We acknowledge the Secretary of State controls the site and can have us evicted. The government owns it and didn’t sign the lease the previous government provided."
The café continues to operate.
The NIO spokeswoman said: "It was always clear that Praxis could be removed at short notice without compensation. If it has invested £400,000 in the site, it has done so at its own risk.
The spokeswoman said that Historic Royal Palaces would ensure broader access to the castle, "provide a greatly enhanced educational focus", generate jobs and economic growth and "greatly reduce the burden on the taxpayer".
A spokeswoman for HRP said it would be open to discussions with Praxis about working with its service users, although Ringland said this meant "volunteering, not meaningful employment".
A spokeswoman for the Charity Commission for Northern Ireland said it was aware of recent news articles about Praxis, but "this has not been raised with the commission at this time".