Yesterday, committee chairwoman Noelene Raffills said a legal opinion stated there were special circumstances to do with the history of the site at 75 Victoria St West.
"The special circumstances part of the Resource Management Act is not used very often.
"This time of submission is the time for people to put in their views on this.
The hearing panel is not confirmed but Mrs Raffills said her record was to have an elected person from the local board or council on panels.
Special circumstances noted by the committee include the proposed building being on a site scheduled for heritage protection.
The hotel building, which had parts dating back to 1878, was demolished on council orders after a low-rise redevelopment in November 2010 left it unstable.
Residents and business in the area had an interest in view of the change of scale of the building expected on the site.
With the old hotel gone, the owners of the site, brothers John and Michael Chow, applied last December for a 15-storey tower building for a mix of activities including a brothel, Penthouse Club, hotel and offices.
The first two levels of the black-toned glass building will be blank and layered by a LED screen mesh facing Victoria St. This will carry graphic images for events such as a countdown to the New Year.
The committee said there was the "sensitivity of the people" to the proposed brothel activity.
Opponents include Auckland's Catholic leader, Bishop Pat Dunn.
The committee said the council needed to consider the impact on the community in terms of nuisance or incompatibility with its surrounding precinct, including Federal St which has views of St Patrick's Cathedral.
CHOWS' CONCEPT
* The owners want to build 15-storey tower building on the site of the Palace Hotel.
* It would be used for a mix of activities including a brothel, Penthouse Club, hotel and offices.
* The first two levels of the black-toned glass building will be blank and layered by a LED screen mesh facing Victoria St.
* Public comment is being sought on the bid. The deadline is May 4.