Council chiefs have been forced to submit a new planning application for the expansion of the Newbridge Park and Ride site on the edge of Bath.
Bath and North East Somerset Council will now put together a new scheme for the site to avoid a lengthy legal battle with campaigners who say the authority has presided over a shambles.
The authority has failed to get a number of conditions of the original planning permission for the expansion of the park and ride site signed off, and its consent to do the work has now lapsed.
The scheme is part of the Bath Transportation Package - a programme started by a previous Conservative regime and now being piloted by the council's ruling Liberal Democrats.
When a new Liberal Democrat administration took charge at the Guildhall in 2011, it scrapped a controversial bus rapid transit route serving the park and ride site and cut 250 spaces out of the planned expansion scheme.
Campaigners who have been against the council's expansion plans from the outset, will now be given another chance to oppose the plans.
A statement from B&NES Council said: "After thorough consideration, the council has decided that due to the changes made to the proposals, a new planning application is required. This will mean that project can continue without further delay.
"A legal challenge to our previous intention, which was a possibility, would have almost certainly led to an extremely long delay before construction starts, resulting in Bath residents and businesses waiting much longer than necessary for the benefits of the additional spaces."
It added: "Preparation on the new application will start immediately and it will be submitted as soon as possible with a view to starting work on site in the autumn."
Newbridge Matters, a group of residents opposed to the scheme, has claimed the news as a victory as it was its legal team which had been challenging the council on the validity of the old planning permission.
A spokesman said: "Obviously we are delighted that after years of opposition to this unworkable scheme, the construction has been halted."
The group is adamant that it would have won any legal challenge, after proving that conditions relating to the BRT and flooding had not been officially discharged - ie completed and signed off.
Some trees had already been taken down at the site in advance of work.
The group spokesman added: "We are dismayed that B&NES Council has chosen to act in this way, resulting in the loss of several mature trees in our neighbourhood. It is worrying that millions of local taxpayers' money has been spent on the Bath Transportation Package and the council seemingly feels it is unnecessary to follow the statutory regulations."
There has also been criticism from local Conservative councillors, who have accused the council of a "botched" job.
Councillor Tim Warren (Con, Mendip) said: "We are absolutely astonished that it has taken the Liberal Democrats so long before deciding to resubmit plans for the Newbridge Park and Ride extension.
"B&NES has had nearly two years to put in a new planning application for the expansion, yet now at the 11th hour, just as work was meant to start, they announce it has been delayed."
He added: "So we are now left with a situation where the expansion is only half that it was meant to be, and delayed by nearly a year.
"B&NES also remains the only council in the country which is paying for the brunt of the transport package itself, rather than through Government funding."
The council says that other parts of the £27 million package are making good progress.
The expansion of the Odd Down Park and Ride has been finished, while a similar project at Lansdown is due to end in the next few months, and this year will also see further work on traffic signalling and bus routes around the city.
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