If a DHCP server is reached and leased configuration is successful, TCP/IP configuration is completed. However, if a DHCP server is not reached after approximately 60 seconds or the leased configuration fails, the computer uses the setting on the Alternate Configuration tab to determine whether to use automatic TCP/IP configuration or to configure TCP/IP with the alternate configuration. When automatic is used, TCP/IP uses an address in the IP address range 169.254.0.1 through 169.254.255.254. Thus, the old IP address from the office is no longer being used.
 
The Alternate Configuration tab provides an option for setting up an Static IP Address. This is used when a DHCP server is not available. The Static IP Address needs to be a Private or Internal IP Address. The addresses set aside for this purpose are 10.0.0.0 – 10.255.255.255,  172.16.0.0 – 172.31.255.255, or 192.168.0.0 – 192.168.255.255.  Using a Static IP Address and a Hosts file with the machine names and IP addresses on each user machine will provide an option to alleviate the connection issues.

To configure TCP/IP for an alternate configuration for Windows 7:

1. Click the Start button.
2. Choose Control Panel.
3. Select Network and Sharing Center from the toolbar.
4. Select Change adapter settings.
5. Right-click the connection that you want to change.
6. Select Properties.
   • If you are prompted for an administrator password or confirmation, type the password or provide confirmation.
7. Select the Networking tab.
8. Under This connection uses the following items, click either Internet Protocol Version 4 (TCP/IPv4).
9. Select Properties.
10. On the General tab, click Obtain an IP address automatically.
11. On the Alternate Configuration tab, click User configured.
12. Type the appropriate values for the following:
    • IP address
    • Subnet mask
    • Default gateway
    • Preferred and alternate DNS server
    • Preferred and alternate WINS server
13. Select OK.

Symptons:

When you try to change the Hosts file or the Lmhosts file, you may receive an error message that resembles either of the following.

• Access to "C:\Windows\System32\drivers\etc\ hosts" was denied.
• Cannot create the "C:\Windows\System32\drivers\etc\hosts" file.

Notes:

• Make sure that the path and file name are correct.
• This issue occurs even though you log on by using an account that has administrative credentials.

Workaround:

To work around this issue, follow these steps:

1. Select Start > All Programs > Accessories.
2. Right-click on Notepad.
3. Select Run as administrator.
   • If you are prompted for an administrator password or for a confirmation, type the password, or click Allow.
4. Open the Hosts file or the Lmhosts file.
5. Make the necessary changes
6. Then select Save on the Edit menu. 

Note:  You cannot modify the Hosts file or the Lmhosts file in Windows 7.

For further details, refer to the Microsoft® article You cannot modify the Hosts file or the Lmhosts file in Windows Vista, Windows 7, and Windows 8.