diff --git a/src/k1link/device_plugins/xgrids_k1/facade.py b/src/k1link/device_plugins/xgrids_k1/facade.py
index cabcca2..be49053 100644
--- a/src/k1link/device_plugins/xgrids_k1/facade.py
+++ b/src/k1link/device_plugins/xgrids_k1/facade.py
@@ -17994,7 +17994,15 @@ class XgridsK1CompatibilityService:
                     raise RuntimeError(
                         "retained PREPARED STOP owner changed before topology commit"
                     )
-                self._retire_application_control_for_network_change()
+                # Verify owns a read-only replacement of the local control
+                # generation. A terminal device fault may leave that dead
+                # generation in ``failed`` even though its worker/socket are
+                # already gone. Retire only that local owner; the physical
+                # ledger remains unresolved until fresh DeviceInfo/Status
+                # evidence below classifies it.
+                self._retire_application_control_for_network_change(
+                    allow_terminal_failure=True,
+                )
                 projected_intent_id = self._apply_read_only_device_topology(
                     transport_ref=actual_transport_ref,
                     connection_mode=requested_mode,
diff --git a/tests/test_xgrids_acquisition_lifecycle.py b/tests/test_xgrids_acquisition_lifecycle.py
index d4b1c42..3f0b59a 100644
--- a/tests/test_xgrids_acquisition_lifecycle.py
+++ b/tests/test_xgrids_acquisition_lifecycle.py
@@ -21481,6 +21481,22 @@ def test_public_physical_recovery_refreshes_stale_dhcp_then_classifies_without_w
     )
 
     restarted, runtime = service_with_fake_runtime(tmp_path)
+    retirement_permissions: list[bool] = []
+
+    class TerminalDeviceFaultControl(FakeInteractiveControlSession):
+        def retire_for_network_change(
+            self,
+            *,
+            allow_terminal_failure: bool = False,
+            **kwargs: object,
+        ) -> dict[str, object]:
+            retirement_permissions.append(allow_terminal_failure)
+            if not allow_terminal_failure:
+                raise ApplicationAcceptanceError(
+                    "terminal device fault requires explicit local retirement"
+                )
+            return super().retire_for_network_change(**kwargs)
+
     association_probe = FakeHostWifiAssociationProbe("a" * 64)
     restarted._host_wifi_association_probe = association_probe  # type: ignore[assignment]  # noqa: SLF001
     capture = _durable_status_capture(device_id="test-ble-transport")
@@ -21550,6 +21566,10 @@ def test_public_physical_recovery_refreshes_stale_dhcp_then_classifies_without_w
     assert configured_recovery["required_connection_mode"] == "bridge"
     assert configured_recovery["requires_live_gatt_validation"] is True
 
+    restarted._application_control_session = TerminalDeviceFaultControl(  # type: ignore[assignment]  # noqa: SLF001
+        initial_state="failed"
+    )
+
     verified = asyncio.run(restarted.verify_connection(ConnectionVerifyRequest()))
 
     after = restarted._physical_command_ledger.snapshot().record  # noqa: SLF001
@@ -21576,6 +21596,7 @@ def test_public_physical_recovery_refreshes_stale_dhcp_then_classifies_without_w
         facade_module.COMMAND_BOUND_ASSOCIATION_TIMEOUT_SECONDS,
     ]
     assert command_edges == []
+    assert retirement_permissions == [True]
     assert runtime.start_calls == []
     assert runtime.stop_calls == 0
     assert verified["k1_ip"] == "192.168.68.51"