The Crosthwaite family had taken out an injunction to stop the development because they believed the expansion to a 60,000-seater stadium would block sunlight into their home of 50 years.
However, Hammersmith and Fulham Council exercised statutory powers to enter into a temporary lease agreement with Chelsea which ensured the injunction was not valid, British media said on Monday.
The family will be entitled to statutory compensation but would need to look at other legal steps to try to stop the development going ahead, according to the reports.
The stadium development was given planning permission a year ago and has been signed off by the Mayor of London.
Chelsea, whose stadium currently holds 41,000, called on the local council to intervene and they have now taken advantage of planning laws to stop the injunction.
Chelsea expect to be playing at Stamford Bridge until the 2019-20 season and will then play at an alternative venue - likely to be Wembley Stadium - for up to four years while the stadium development is carried out.
(Writing by Ken Ferris; Editing by Pritha Sarkar)
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