The son and wife of bankrupt property developer Sean Dunne have received planning to build a $21.5 million (€15 million) apartment and retail building in the fashionable Soho neighbourhood of New York.

Five commissioners on the New York City Board of Standards and Appeals voted unanimously giving the green light to property company TJD21, owned by Mr Dunne’s son, John, and wife, Gayle Killilea Dunne, to begin construction at 74 Grand Street.

The planners shelved an earlier objection that the five-storey building have a nine-metre backyard and instead approved a six-metre yard, increasing the profit the Dunnes could make on the project to $3 million from $653,000, which, they had said, wasn’t enough to make it worth building.

Approval was granted subject to some environmental testing on the Manhattan site. A planning source said this should only delay the start of construction on the site by a month or two.

Sean Dunne, who filed for bankruptcy in Connecticut last year with debts of $942 million, told creditors that he was acting as a salaried adviser on the Soho project.

The National Asset Management Agency, one of Mr Dunne’s largest creditors, is challenging his discharge from bankruptcy in Connecticut, alleging that Ms Killilea is developing property with money fraudulently transferred from her husband, a claim they deny.

The Soho property was bought last year for $4.95 million in cash and TJD21 has estimated that it would cost $18.5 million to build funded with a loan of $13.5 million.

The company estimated that four apartments in the building could sell for between $3.3 million and $7.7 million, though these sales prices may be conservative.