They are directly quoted. They did a press interview.
And this is the kind of story that is given to reporters by an interested party - journalists don't randomly pore through small-town occupancy certificate filings hoping to find a story.
What I'm talking about is that they should have been able to get the permit, instead of the permit board putting their nose where it doesn't belong in the first place.
The permit board probably asked their attorney or them (if they were doing their own closing) whether they could sign an affidavit attesting that they were in full compliance with municipal law regarding occupancy.
They most likely responded that they could not.
This probably prompted a hearing. At such a hearing the applicant usually states whether they intend to cure and in what time frame. Usually the board can grant a waiver contingent upon future compliance.
They apparently indicated at the hearing that they intended to never be in compliance, despite the fact that they had previously dishonestly represented themselves in a way which implied that they would. At which point the board determined that they could not grant a permanent waiver without violating municipal law.
Thism is not the board "sticking their nose in" - this is the board conducting due diligence on an occupancy certificate application or, in other words, doing the job the city hired them to do.