NHS Tayside could receive up to £14.5 million from the development of Strathmartine Hospital but only if the deal is done before 2018.
Plans to provide 224 houses on the site were approved by Angus Council last month, but the decision is expected to be called in by the Scottish Government.
A ‘clawback clause’ inserted into the sale deal for the site means a percentage of income from 180 homes will be paid to the health authority.
However, a meeting of the NHS Tayside finance and resources committee heard that the health board will only benefit from the clause on its sale of the building in 2003 if the application goes ahead before 2018.
Director of finance Ian McDonald told members: “This was a site that we disposed of in 2003 to a developer for the development of a housing site.
“We received £1.5 million in 2003 and we have a claw ack clause which expires in 2018 based on the development getting planning permission.
“At its December 18 meeting Angus Council approved 220 houses on the site.
“The clawback would apply when planning application is granted. That could be anything between £1 million and £14.5 million but we are looking at about £5 million back.
“The Scottish Government will now call in the deal. If it hadn’t been called in we would have had that money.
“It could take about four to five months for the Scottish Government to assess that so we await their decision with interest.”
The decision to approve plans to transform the one time asylum into housing was controversial after a refusal was overturned at a special meeting of Angus Council.
The proposal by developer Heathfield Ltd to create 198 new-build homes and 24 flats on the grounds was originally recommended for refusal on the grounds that it breached council policy and was excessive in scale.
Angus Council will have a further meeting on February 12 before it is expected the go-ahead will be automatically called in by the Scottish Government due to the objection from neighbouring local authority Dundee City Council.
A spokeswoman for Angus Council said: “A report will go to council committee in February setting out heads of terms. Before a decision for planning permission is granted it needs to be notified to Scottish Government.”
If the decision is called in Scottish ministers will have the final say on the application.