Upper Hunter Shire Council has exchanged contracts to purchase the historic building for $3 million, with plans to renovate it and create a new home for Scone Library and an additional community space.

Council's general manager Steve McDonald said they plan to restore the 90-year-old brick framed building, which features a sweeping timber staircase, to its "former glory".

It will undergo an estimated $1.8 million restoration works, which will be staged over ten years and will include replacing the roof and repairing the front facade.

"The outside facade will all be done up and when we do up the inside it will a lively, bright, open space for the library and other cultural activities, with regular programs being held there," Mr McDonald said.

To pay for the property, council plans to take on a $3.5 million loan and undertake the first stage of repairs, and will seek grant funding for the construction of the new library space.

"What we will do next is set up a working group to develop a plan and a concept of how we're going to develop the building," Mr McDonald continued.

"Once the committee is set up we will consult with the community and make sure we're in a very sound position to be able to apply for grant funding."

The building is also expected to pay for itself once it provides council with a commercial revenue stream through leases, Mr McDonald says.

That, coupled with the saving realised by not having to pay rent on the current Scone Library, will go towards offsetting the cost of servicing the loans and ongoing operational costs.

"There are four vacant shops and we have already had inquiries about one, we want to make sure that it's fully leased so that the project pays for itself," Mr McDonald said.

"It's a commercial building and a number of tenants want to renew their lease with us which is very positive because they can see the benefits of the upgrade.

"With the library going in there will be a lot more foot traffic - which again is good for business operations that rely on foot traffic.

"We're also going to reconfigure the car park at the back so it's caravan friendly for when the bypass goes through."

Mr McDonald said the building deserved restoration and would complement the revitalisation of Kelly Street, but will be funded independently of that project.

"Campbell's Corner needs work and council will ensure the building is lovingly restored, creating a permanent home for a state-of-the-art library and other multipurpose cultural spaces for the whole community," he said.

"Rescuing an old building is not cheap and takes time, but in the long run, the community will own an historically important landmark, a permanent and expansive library, and stunning spaces for community and commercial activities."

The Scone building was the fourth Campbell and Co's department store building constructed in the region.

In 1870 Malcolm Campbell built a two-storey store in Muswellbrook and the Campbell family lived in the top floor.

Upper Hunter Shire Council's move to purchase the Scone building follows on from neighbouring Muswellbrook Shire Council, who purchased their Campbell's Corner building a few years ago and have undertaken extensive renovations.

Council's director corporate services Kristian Enevoldson said the additional community space could be utilised to display local art, among other things.

"The upstairs space is quite a large vacant area so there's the potential to accommodate both a library and a space for potentially revolving art exhibitions and exhibiting local art," he said.

"It's just all about activating the space and this project I think will really compliment the revitalization works that are happening on Kelly Street in terms of just creating a cultural hub."

Upper Hunter Shire Council has been in negotiation with the owners of the building for two years, in an 'off-market' transaction, which has been kept commercial-in-confidence.

The decision to negotiate to purchase the building was subject to due diligence and Office of Local Government Capital Expenditure Review, which is now completed, and was made by a majority of councillors at the January 2018 Ordinary Council Meeting, and confirmed at the July 2019 and October 2019 meetings.

These were closed meetings as the negotiations were commercial-in-confidence.