TK Maxx is locked in a bitter dispute with the property company that runs the Queen’s estate over a deal to open a flagship store at London’s Piccadilly Circus after it decreed the retailer was “not posh enough” to trade at the capital’s famous landmark.

The US discount designer fashion retailer signed a deal in February to open a store in a former Virgin unit at Piccadilly Circus with leaseholder Golfrate, which is represented by managing agent Criterion Capital.

But the deal was dependent on approval from the site’s freehold owner Crown Estate, which also manages swathes of central London, including the majority of Regent Street.

According to a source, Crown Estate rejected TK Maxx because it didn’t fit with the Crown’s strategy of taking the area upmarket. The source alleged the retailer has been perceived as a “market stall for chavs” by the freeholder.

The site, next door to Eros, has been empty for over four years and more recently the nearby former Tower Records shop has also been left empty after the demise of its tenant Zavvi. The source said TK Maxx planned to create its European flagship on the site, creating much-needed jobs.

TK Maxx trades predominantly from retail parks and prides itself on being the “largest off-price retailer in the world”. It stocks end-of-line designer brands at prices with up to 60 per cent off.

It is still unclear if TK Maxx will finally get the go-ahead to open at Piccadilly Circus. The store would be the retailer’s second central London store, after making its debut on Kensington High Street last year.

Crown Estate would not comment on the details of the negotiation, but a spokeswoman said: “We have a strategy for the area that we have discussed with the head lessee.”

TK Maxx was unavailable for comment.