Knightsbridge Canberra's owner, Quanton Pty Ltd, has applied to change the lease over their Leichhardt Street block to add "guest house" as a permitted use of the land.

The application to the ACT's planning authority came in response to a damning judgment from the ACT Civil and Administrative Tribunal, which found Knightsbridge had been operating in breach of its crown lease conditions since it opened in 2017.

In a 37-page verdict handed down on December 1, the tribunal found the complex was a commercial accommodation operation, which wasn't permitted under a lease which required the prime corner block be used for "multi-unit housing".

The tribunal cited numerous facts to prove Knightsbridge was being used for commercial, rather than residential, purposes, including that it advertised itself as providing serviced apartments, offered overnight bookings and one of its 56 units had been converted into a reception area.

The ACT's planning authority was ordered by the tribunal to serve Knightsbridge with a "controlled activity order", which would effectively ban it from accepting short-stay guests.

The company behind the complex was given six weeks from December 22 to "rearrange" the complex's operation so it complied with order.

The Canberra Times understands the company wanted a 12-month grace period, while the ACT planning authority had argued for a six-month transition period.

The company lodged the development application to vary the crown lease with the ACT Planning and Land Authority on December 11, with public consultation starting earlier this month.

Knightsbridge Canberra is still accepting reservations on booking websites such as Trivago beyond February, which is past the six-week grace period ordered by the tribunal.

Quanton Pty Ltd is a subsidiary of Consolidated Builders Limited, whose managing director is prominent Canberra developer Josip Zivko.

Mr Zivko, via his spokeswoman, declined to comment when contacted by The Canberra Times.

The Australian Hotels Association ACT branch lodged the original lease breach complaint against Knightsbridge in 2019. The group's general manager, Anthony Brierley, was concerned the Kingston complex could create a precedent which allowed any building to be turned into a hotel without being subject to the necessary approvals and oversight.

The ACT planning authority did issue a "show cause" notice to the company after receiving Mr Brierley's complaint, but decided not to pursue any sanctions.

The tribunal lashed the planning authority's handling of the complaint in last month's judgment, saying its investigation into Knightsbridge's operation "can best be described as minimal".