Onyx Espresso Bar had been using the space at the rear of the premises for outdoor seating, which was enclosed to create a safe place for children and pets to roam around, without council approval.

But last week Newcastle City Council slapped the business with an order to shut the courtyard down and "operate in accordance with the original approved development consent for the site which requires car parking".

"They said 'if we find tables and chairs out there, we'll fine you $3000'," owner Leya Aboltins said.

Ms Aboltins applied to modify her development application last year, which included requesting to use the area for outdoor dining.

But she said the company she used to complete the application was advised by council the DA would not be approved with the outdoor dining component, so she removed it.

Ms Aboltins said the three car parks were meant for the building's three tenants, but were not regularly used. She said she spoke to the other two tenants who were fine with her converting the space into outdoor dining, so she did.

"It hadn't been used as a car park for that long grass has grown over the gravel," she said.

"We never had anyone complain that they couldn't park.

"So many local residents walk here, our staff ride their bikes here."

But council officers inspected the site and issued the order to close the unauthorised dining space.

"The rules around parking are clear," A Newcastle City Council spokesperson said.

Ms Aboltins said this had cut her seating capacity in half, which would have a big impact on her takings.

"I honestly don't know how the business will survive without this space because we've relied so much on it," she said.

"People with dogs and families want to sit outside. You feel quite restricted inside, outdoor is a lot more relaxed."

Ms Aboltins set up a petition to spread the word about what happened and urge the council to reconsider.

After a stressful and upsetting few days worrying about the future of her business, council approached Ms Aboltins later in the week offering to work with her on how to lodge a complying application to have the parking spaces removed from their DA.

"We are willing to work with Onyx under the same terms as any other small business who wishes to modify their parking rules," the council spokesperson said.

"We're feeling a lot more hopeful now," Ms Aboltins said.

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