So I came across this error for the first time today when trying to SSH directly into a clients VPS.

login as: root
root@server’s password:
Server refused to allocate pty
stdin: is not a tty

After a quick google search I came across the fix.

[root@node /]# vzlist -a
VEID      NPROC STATUS  IP_ADDR         HOSTNAME
1337         78 running 69.10.59.80     grumpy.thelinuxnoob.com
[root@node /]# vzctl exec 1337 /sbin/MAKEDEV ptyp
[root@node /]# vzctl exec 1337 /sbin/MAKEDEV tty
[root@node /]# vzctl exec 1337 /sbin/MAKEDEV pty

The issue should now be resolved and you can SSH into the VPS.