But the ACT Civil and Administrative Tribunal said the decision paved the way for the builders to consider other development proposals.

The neighbourhood dispute began after the ACT Planning and Land Authority approved a development application to knock down two houses in Hartley Street and build a 16-unit, two-storey building, with basement parking, in its place.

Local residents Sanie Ymer and William Tucker opposed the plan and challenged the planning approval in the tribunal, saying the building did not meet the criteria of the territory plan.

The pair argued there were too many units in the development, it was not in keeping with the existing neighbourhood, would create traffic problems, and the design would limit access to communal space and sunlight.

ACTPLA and the developers argued the design was appropriate or could be given the go-ahead with some additional conditions.

But the tribunal found in favour of the residents and refused the development application.

In a judgment published on Tuesday, the tribunal members said the proposal did not meet the multi-development housing development code and parts of the inner-north precinct code.

The tribunal found the breaches meant many of the units did not have proper solar access, which meant they would not be energy efficient and would be cold in winter.