Windows 7 Preventing delete while application requires delete option to generate files

Need help setting permission on an applciation forlder to prevent delete on files. The application generate files in two step (Create the file first and then write the content to it). When restricitng delete files are created with no content (0 Kb)
Permission id id apply was granting modify permission to everyone on the targeted folder for folder/ subfolders and files and added a deny delete permission for everyone at the same level. But when I am trying to create file I am getting a message stating that permission is denied and the file created with no content (0 Kb).