With former Leeds keeper Scott Carson only on loan with Charlton from Liverpool, Addicks boss Iain Dowie wanted the chance to exercise a recall clause in any potential loan, similar to the one Liverpool have with Carson.
However, Leeds were unhappy with this situation and the deal was pulled late on Thursday night.
"It looked as though the deal was done but Leeds were uncomfortable with the recall clause we were keen to implement so, regrettably, it didn't happen," Addicks general manager Andrew Mills told the club's website.
"We felt we needed to mirror the Carson situation. Iain couldn't afford to loan out Steph and not have the option to recall him in the event of anything happening with Scott."