The Government Office for the South East issued an article 14 direction stopping Elmbridge Borough Council determining developer Gladedale's scheme for the Jolly Boatman site.
Gladedale wants to build a hotel, 66 residences and a care home for the Royal Star and Garter military charity. But Historic Royal Palaces (HRP) urged the government to call in the application.
The council planning committee met this week and deferred its decision pending further investigation on traffic and affordable housing. This is despite backing from the area planning committee last week.
Local protesters complained that the building would ruin views of the palace. But the charity has insisted that the project marks its only chance to replace its 90-year-old home nearby (Planning, 29 August, p3).
Both sides have celebrity support, with Falklands conflict veteran Simon Weston in favour and historian David Starkey against. CABE called the plans "high-quality and appropriate" for the site.