A shareholder in the Grape Bay Beach Hotel is battling to overturn Ministry of Tourism objections to plan to change three valuable cottages on the South Shore property into private homes.

Adriana Kripl claims when she invested in Grape Bay Beach Hotel ? the company which bought the closed White Sands ? it was on the implicit understanding that the cottages could be changed from tourism zoning to residential.

But Cabinet's Special Hotel Developments Committee decided in March that the three homes should not be taken out of the tourism stock.

As a compromise, the committee proposed that Mrs. Kripl and her family could use the cottages, but they would not be transferred out of the tourism stock.

In a letter to the Department of Planning, Grape Bay Beach Hotel's lawyers Cox, Hallett, Wilkinson, say loans to renovate the cottages will only be available if the cliff top properties which overlook South Shore in Paget are zoned residential.

The company bought the hotel and renamed it Grape Bay Beach Hotel in January this year after White Sands went into receivership with heavy debts and closed in March 2002.

The lawyers say the compromise from Government is "contradictory" and forces the Kripls to be long-term tenants of the hotel.

The application for final approval to turn the cottages into residential units is now before the Building Applications Board.

"As a shareholder of the company Mrs. Kripl invested a substantial amount of cash without which the company would have been unable to assume a mortgage and purchase the property out of receivership," the letter, which is in the Planning Department file, states.

"This investment was made as a consequence of the receiver indicating that permission had been given in principle to a previous prospective purchaser by the Ministry of Tourism that the cottages could be used for residential purposes and that such a use would be more than likely to be permitted following the company's own purchase.

"Although Mrs. Kripl supported the re-opening of the hotel and continues to work towards its success, her only interest was, and still is, in the cottages as separate entities from the hotel.

"As part of the shareholder agreement of the company, it was agreed that once the cottages had been re-zoned as a Residential 1 area, Mrs. Kripl would exchange her shares in the company for full ownership of the cottages as sub-divided lots from the hotel area.

"Such an agreement was not felt to be presumptuous given the assurance that approval in principle would be given by the Ministry of Tourism and following this, by the appropriate procedure, the Department of Planning."

If the Kripls relinquish residence or ownership of the cottages, they will revert back to tourism stock under the Government arrangement, states the letter.

"This has left our clients in an awkward position in which although permitted to use the cottages for residential use in theory, their capacity to use the cottages as their family dwelling units is in practice severely curtailed."

The Kripl family had been using one of the cottages as a residence since March this year, while the other two have remained empty awaiting renovation.

"The funds for renovation that are hoped to be generated by independent equity loans on the cottages will only be financially possible following their rezoning and subdivision from the hotel," the letter states.

"The present permission entails the contradiction of probable long-term residential use being permitted within a tourist zoning.

"It enforces the continued ownership of the cottages by the company as part of the non-subdivided overall site which undercuts any meaningful residential use for the Kripl family."

This means Mrs. Kripl will be unable to transfer the cottages to her family, and the family "will at all times have their proposed residential homes subject to the inherent financial risks of hotel ownership in remaining part owners of this entity".