Owners of the Bethungra Hotel have been stopped in their effort to fund the building's future.

The hotel's owners, Robyn and Allan Cox, have been told not to accept any more applications from people wanting to become owners of the hotel for $100.

The idea for the $100 application fees came to Mrs Cox one morning, after the couple had been racking their brains for a way of selling the hotel, while also making sure it had a good future in the Bethungra community.

The system required a minimum of 20,000 applications by 15 March, and if this wasn't met, all fees would be refunded.

The applications would be sorted through, with a cull of the better proposals to be submitted to an independent selector to choose an entrant who would best benefit the community and ensure the building's preservation.

Mrs Cox said she had been informed that a lawyer in the Department had ruled that the applications didn't require a sufficient "skill set" to prepare, and therefore the process was too much like a lottery, which was illegal.

"We've been talking with them for months and they didn't have a problem, but after some very negative anonymous comments on our Facebook page they've called a temporary halt," she said.

The couple bought the hotel in 2014 for $470,000.

Mrs Cox said if the minimum of $2 million in fees were received, they would receive only $750,000 - $800,000 after GST, income tax, stamp duty and legal costs, barely compensating them for improvements to the hotel and their time in administering the system.

She said she had been completely up front and honest with the department, the Australian Taxation Office and everyone else connected with the project.

"We bought this as a family residence, but now we'd like to see it run properly as a B&B or some other kind of business, which we can't do ourselves for health reasons.

"We're trying to start a conversation about how owners like us, who want to sell a building but also want to make sure the building has a bright future, can try experimenting with another way other than just putting it on the market and waiting for who knows how long before someone makes a bid.

"If people buy a building like this, they can't get an ordinary mortgage, because it's zoned as a business.

"Banks insist they take out a business loan, which has a much shorter payback - and they end up having to service a big debt .

"With our model, they would come into the building debt-free, leaving them free to invest further funds and all their ideas and energy into developing the building in a way that preserves the building, gives them a good living, and creates employment and interest and activity in the town - it's a win for the building, for the new owners, for the community and for tourists who visit.

"There are literally hundreds of buildings like this in country towns that urgently need TLC, and we'd like to see our funding model or something like it become an entirely new way to stop them from falling into disrepair and being bulldozed.

"If they're just boarded up and left alone, they can deteriorate quickly - kids and animals get in, and once they're gone, they're gone.

"If this model, perhaps with some tweaks suggested by interested third parties, were successful we could perhaps set up a non-profit foundation that could apply a similar model - if it were tax-free you could perhaps reduce the number of could funders needed to 10,000 or something like that."

Mrs Cox said that before the Department of Fair Trading asked them to stop, only around 200 people had applied, but she thought a lot more had been putting it off till the last minute.

If the Department were to lift its temporary ban, she would consider making a new deadline and inviting applications via social media again.

The Department, she said, had been kept fully informed and had not found anything illegal about her template, but because it was breaking new ground had stopped it in case they did find a problem emerged as it developed. 

Meantime, the money sent in with the applications is sitting untouched in a dedicated bank account, and the applications are unopened and will remain so unless and until the minimum is achieved.