Gerringong Surf School owner Rusty Moran says the council is trying to shut down his business, an allegation the council denies.

Mr Moran says council policy says up to three surf schools are allowed to operate on Seven Mile Beach, in any one of three zones. His surf school uses Zone A at the northern end of the beach, as it is more protected and better suits his clientele, who are mainly children.

Mr Moran was operating under a temporary permit while a development application and long-term licence are being processed.

The temporary permit has since expired.

He says after community lobbying, the approval of his DA was changed to restrict his use of Zone A to four months of the year, most of it in winter.

"It's like giving someone a licence to open a cafe, then saying they can only sell coffee after 3pm," he said.

He is challenging the conditions of the DA in the Land and Environment Court. He says his legal team has advised him not to accept a short-term licence offered by the council, because it would affect the case before the Land and Environment Court.

Meanwhile, the council has been scrambling to develop a management plan for Seven Mile Beach under the Crown Lands Act, which came into effect in 2018.

They say the temporary permits have expired, and surf school operators for Seven Mile Beach are now required to hold an interim short-term licence to operate.

A council spokesperson said the short-term licence was not related to the determination about the development application, which is being challenged.

The development application would form the basis of a long-term licence, which would be included in the Crown Land management plan, to be completed in 2021.

"This [court challenge] has no bearing on council issuing the new short term licence," a council spokesperson said.

Another issue is the pied oystercatcher, which is endangered in NSW and nests in the dunes of Seven Mile Beach.

Mr Moran says the council is using the need to protect the bird to justify withholding approval for his preferred DA conditions. He has recently launched a GoFundMe page to pay for an ecological assessment of what impact his business may have on the bird.

The council denies that allegation, and said the study was "initiated by Rusty as part of his court action against us".

Both parties appear to be at a stalemate.

"Gerringong Surf School has elected not to sign their licence ... [their] recent permit is no longer operable and as such they have no approval to use the crown reserve for their activities," a council spokesperson said.

"The council is now seeking legal advice regarding its options as a land manager."

Mr Moran has sought assistance from Kiama MP, Gareth Ward.

"They've painted me into a corner, and are threatening to fine me for operating illegally," he said.

"Rather than have the situation escalate, I've reached out to Gareth Ward. I'm not coming along trying to change the rules, I'm trying to fit into an existing policy."