Salim Mehajer and his family lost potentially more than $10 million in half an hour on Wednesday night, as planning changes benefiting their property holdings were overturned.

"This highly suspicious sequence of events ... fits with a familiar pattern" 

Labor Councillor George Campbell

Viv May, a former Mosman council bureaucrat, was placed in charge of Auburn Council's affairs earlier this month after all councillors were suspended by the state government following concern about its planning decisions.

Salim Mehajer arrives at Auburn Council in January. Photo: Fairfax

On Wednesday during his first meeting as the council's administrator, Mr May overturned two of the council's most controversial planning decisions, depriving Cr Mehajer of up to $10 million in profits.

Advertisement

The council turned its attention to the sale of public land to Cr Mehajer at Lidcombe's John Street. In December, council had voted to sell Cr Mehajer the land for $8.5 million. A Mehajer family company had designs on turning it into a 96-unit residential complex.

Such a development would expect greater than $100,000 profit per unit on development land around Lidcombe, putting the Mehajer family windfall for the project over $10 million before factoring in an apparent discount to the sale price revealed by Fairfax Media. 

"This highly suspicious sequence of events ... fits with a familiar pattern": Labor Councillor George Campbell said council was "negligent" in not pursuing a third valuation. Photo: Peter Rae

Fairfax later reported the market value of such land was between $13 and $17 million. It then emerged council itself had been provided with a second valuation which also valued the land more highly. Councillors said they had failed to spot the second appraisal, which had been tucked away at the back of council business papers provided to them before they voted to sell at a lower price.

Fairfax revealed the second valuation put the land's price at least $5 millon higher.

"This highly suspicious sequence of events ... fits with a familiar pattern," Labor Councillor George Campbell said.

Cr Campbell said council was "negligent" not to have pursued a third valuation and more attention should have been drawn to the disparity in valuations of the public land. Mr May said he had reviewed council's valuations and had spoken to council lawyers - widely reported to have recommended the sale be axed - before deciding to overturn the sale.

"Council [should] terminate the contract," Mr May said, and take no further action on the sale until after state government plans to merge the council were finalised.

Mr May then declared his own motion carried.

The sale of the car park to Cr Mehajer was central to Local Government Minister Paul Toole's decision to suspend the council, announced earlier this month.

Also overturned were controversial plans taken to rezone a large section of land on Auburn Road and Susan Street as high-density residential and commercial mixed use.

The move would have allowed buildings as high as 21 metres to be built on a video store owned by Cr Mehajer's sister, Khadijeh, which was recently fire-damaged.

The value of the video store was expected to more than double from the $800,000 purchase price in 2011.

Residential buildings up to 16 metres tall will be allowed to be constructed on the other 35 properties on the street.

Contrary to an earlier report, adjacent rezonings benefiting two properties owned or optioned by two of Cr Mehajer's colleagues, Ronney Oueik and Hicham Zraika are unaffected by the changes. They are likely to come under scrutiny in a forthcoming public inquiry focusing on the council, led by Sydney silk Richard Beasley. 

Auburn Public School Parents and Citizens spokeswoman Gillian Guy spoke in favour of overturning the rezoning saying it had been taken without consideration of the traffic impact on several nearby schools.

"It's [already] taken me 10 minutes by car to travel two blocks [past the newly high-density area]," Ms Guy said.

Mr May agreed, once again declaring his own motion overturning the planing change. Cr Mehajer and his allies Cr Oueik and Cr Zraika did not attend the meeting.