The owners of a block of Rotorua flats at the centre of previous controversy have been told by the High Court to pay debts of nearly $290,000 or lose the property.

The Ranolf St flats, which are connected to landlords Stephen Bhana and his sister Jasu Bhana, could be put up for sale if the trust that owns them doesn't pay its debts.

The 12 flats at 90 to 92 Ranolf St have a capital value of $1.205 million from the 2014 valuations.

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However Ranolf Trust, which owns the flats, has lodged an appeal against the ruling.

A Court of Appeal spokesman told the Rotorua Daily Post the appeal could not be accepted because it was a "day or two" out of time. Ranolf Trust had disputed that, meaning the matter would now go to a hearing. That would not be heard until at least the end of the year, the spokesman said.

The High Court ruling, which has just been published online, is dated June 12 and rules that Ranolf Company Limited, which is in liquidation, was a trustee of Ranolf Trust between 2004 and 2015.

Jasu Bhana is the only director of Ranolf Company Limited.

The other Ranolf Trust trustees are Jasu and Ashok Bhana, Ranolf Company (of which Jasu Bhana is the only director) and Geyserland Limited (of which Jasu Bhana is only director). Stephen Bhana is described in the judgment as the settlor of Ranolf Trust.

Justice Murray Gilbert ruled the trust must pay Ranolf Company Limited's debts totalling $287,948.91 - which includes liquidators' costs of nearly $160,000 and four creditors totalling just over $128,200.

The creditors include Redco NZ Ltd for just over $2000 for seismic evaluation of a Fenton St property, the Rotorua District Council for $6900 for unpaid rates, Jaafar Holdings for just over $96,000 in loan payments and McDonald Law for nearly $23,200 in legal services.

The liquidators' fees were significantly reduced by Justice Gilbert, who said some appeared to be "excessive".

The original amount claimed by the liquidators, Waterstone Insolvency from Auckland, was just over $520,000 and it had received part payment of nearly $27,000.

Justice Gilbert said given Ranolf Company Limited owed only about $100,000 it seemed "extraordinary" the liquidators could incur costs exceeding $520,000.

Justice Gilbert said 19 liquidators had worked on the file clocking up 1240 hours at hourly rates ranging from $120 to $500. The average hourly rate charged was about $350.

He said more than 35 hours had been charged at rates ranging from $120 to $350 an hour for scanning, copying and binding documents and more than three hours were charged for booking accommodation at rates ranging from $120 to $272 an hour. The liquidators also charged $350 an hour for driving to and from Rotorua.

Justice Gilbert reduced the amount owed to the liquidators to just under $160,000.

His ruling said if the trust debts were not paid within 30 days of the June 12 judgment, he ordered the sale of the Ranolf St properties. The net proceeds, once the mortgage was paid, would then be returned to Ranolf Company Limited, which is in liquidation, and the creditors would eventually be paid.

The Ranolf St flats were the centre of a Tenancy Tribunal ruling in April when Stephen Bhana, the property owner, and Jasu Bhana, who acted as the letting agent, were ordered to pay tenants nearly $1800 for failing to provide and maintain their two-bedroom flat in a reasonable state of repair.

The tribunal ruled in the tenants' favour after hearing evidence they did not have any hot water for 36 days, there were four unhung internal doors, a rotting back porch, a large hole where a fireplace had been, an electrical fitting hanging out of the wall, a leaky laundry and no blinds in the main living and kitchen areas and laundry room.

The Ranolf St flats also featured on TV One's Seven Sharp programme at the start of this year after the tenants complained about their living conditions.

Controversial flats on Ranolf St could be sold to pay debts incurred by the owners. Photo/Stephen Parker
Controversial flats on Ranolf St could be sold to pay debts incurred by the owners. Photo/Stephen Parker