More than 30 people had registered to bid on the 14 coastal blocks - which have been advertised since July - at auction tomorrow.

Some potential bidders have been left out of pocket after paying for valuations and other work leading up to the auction.

Harcourts East Tamar real estate agent Andrew Michieletto said he was advised by the State Government on Tuesday that the blocks - 12 at Weymouth, one at Bellingham and one at Lulworth - were being withdrawn.

The State Government has been trying to negotiate an end to a long- running dispute over the demolition of 26 shacks on Crown land in several locations around the state.

The blocks had been offered at a discount price in 2008 to people whose shacks - at sites such as Eddystone Point in the North-East and West Point on the West Coast - were set to be demolished, but none of the shack owners took up the offer.

The Government then announced on August 21 that it had agreed to defer shack demolitions pending the outcome of a review of the implementation of the Crown Lands (Shack Sites) Act 1997.

A spokeswoman for Primary Industries and Water Minister David Llewellyn said the blocks would again be offered to the affected shack owners.

"The minister agreed to defer the sale pending the outcomes from the committee and has undertaken to again write letters to affected shack owners requesting them to respond by expressing interest in the available lots," she said.

"If no responses are received, then the blocks will be put up for auction again."

Mr Michieletto said Harcourts began advertising the auction in late July and 80 people had shown interest in the land.

He said 30 people had registered to bid and many of those interested in the land had made preparations to buy.

Launceston businessman Mark Tapsell said he had been left out of pocket as a result of the cancellation.

He said he spent $300 obtaining a land valuation and closed his business twice to organise finance.

"If I stuffed the Government around in such a thing, I'd probably get a bill," he said.