The Central Otago District Council owns the hall but a community group, the Bannockburn Community Centre management committee, manages the facility, as well as the nearby community-owned church.
Plans to upgrade the hall were well under way and an engineers' assessment report was done recently as part of the consent process, under council building policy, to see if the building was sufficiently safe in the event of an earthquake.
The engineers' report, by Nick Knowles and Rodger Vickers, said there was a "very high risk of complete structural failure of all stone walls in a moderate earthquake event".
The front parapets over the entrance would be likely to experience a "catastrophic failure" and there was an "unacceptable risk of multiple death or serious injury", the report said.
Cromwell Community Board chairman Neil Gillespie said the board had no option but to close the facility.
"It was a pretty hard decision to make, and we know the community will be hugely disappointed, but it's a matter of public safety so there was no way we could keep it open."
The report was commissioned before the Christchurch earthquake, "but looking at what happened in Christchurch, we have to take this information very seriously", he said.
Council property and facility manager Mike Kerr said the walls of the building essentially had no structural integrity.
"They are stone rubble, almost, and the lime and cement mortar between them has degraded and several layers of plaster is all that's holding the walls together.
"Yes, it's stood there for almost 100 years but if there was a moderate [earthquake] shake, it could disintegrate. It's a public building and we have to take a prudent approach," Mr Kerr said.
The board looked at options for strengthening the building, such as building an internal skeleton and lining the inside to ensure the roof remained supported and walls fell outwards.
However, that would still place lives at risk, so demolishing and rebuilding was the favoured option and supported "in principle" by the board.
Management committee chairwoman Margaret Dicey said it was "pretty jolly sad" to lose the facility.
The hall was used almost every day, for events that included meetings, indoor bowls, karate, yoga and birthday parties.
It was frequently used in association with the church for weddings and funerals.
"It really is the heart of our community, so we're very keen to see it rebuilt. Of course we're hugely disappointed but we understand why this decision has been made - you can't muck around with people's safety," she said.
Committee secretary-treasurer Lindsay McIntyre said the hall was able to accommodate almost 100 people and it had been used in the past for Festival of Colour events as well as other concerts.
It was hoped some of the original material, such as the rimu floorboards, could be used in the new building, which would look the same as the existing one.
The board plans to seek feedback from the community about the project and Mr Kerr said the next stage was to decide on plans and seek an estimate of the cost.
