The Black Rabbit Kitchen and Bar, in Bannockburn, had been operating with seating for about 60 instead of the 24 permitted in its consent.
Owner Jimmy Fairweather was told by Central Otago District Council (CODC) staff the day before Labour Weekend he would have to remove the noncompliant seating.
Mr Fairweather estimated he had lost about $20,000 in income since Labour Weekend and said he did not have enough to pay his staff's wages this week.
A statement from the Central Otago District Council yesterday said it was obliged to follow the rules of the Resource Management Act and council staff had been working with the cafe owners for several months over various issues, including public complaints and consent.
Central Otago Mayor Tim Cadogan said the council had been "between a rock and a hard place".
"On the one hand no-one wants to see what some might view as red tape getting in the way of business, but on the other hand, the council is legislatively required to uphold the provisions of the Resource Management Act."
Council staff yesterday rushed through a consent made on Tuesday by Mr Fairweather's landlord for an increase from 24 to 36 seats.
But Mr Fairweather said that would still not allow him and co-owner Katie Funnell to have a viable business and he was considering his options, including whether he could afford to pay for a new consent application that would allow more seating.
He appreciated the council had to follow the rules, but he criticised the timing of the council visit, which meant his cafe had to remove all non-compliant seating during Labour Weekend.
When news of the seating issue spread around the district, some customers came and sat on the floor during Labour Weekend in protest, Mr Fairweather said.
He acknowledged "caveat emptor" or "let the buyer beware", but said neither their lawyer nor previous owners of the business had picked up the seating issue in the cafe consent.
He said he wanted to be a "good neighbour" to those around him, and had been overwhelmed by positive feedback from both neighbours and other customers.
Mr Fairweather said there was a strong need for a cafe in Bannockburn, and that would increase as the district got busier. He is calling on the CODC to consider rezoning some areas in Bannockburn and develop a master plan for the township, in addition to the broader Cromwell master plan which only considers Bannockburn as an outlying district.
