The Crown will enter formal negotiations with a failed Northland charter school over its remaining assets despite a prior agreement in which the school's trust agreed to reimburse the Crown in exchange for one last chance.

Education Minister Hekia Parata announced on Thursday she had terminated the agreement with Nga Parirau Matauranga Charitable Trust, which operates Te Pumanawa o te Wairua charter school at Whangaruru. The school will officially close its doors on March 7 but no students will return this year, Ms Parata said.

The kura, which opened at the beginning of 2014 as one of the government's flagship charter schools, faced an immediate range of issues including drug use, low achievement, a falling roll and poor governance.

Ms Parata put the kura on notice in February last year. An audit the following month was followed by a order to the trust for a remedial plan. In a letter to the trust dated July 4, Ms Parata said she acknowledged the board had taken measures to address issues identified in the audit but they were not sufficient for her to "make a definite decision to keep the kura open".

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She then set conditions the trust had to agree with if the school remained open. One condition was: "In the event of termination, realise the value of the land and chattels to reimburse the Crown for as much of the funds invested as possible."

Ms Parata said if both parties couldn't agree on the conditions she would issue a "Notice of Intent to Terminate the Agreement".

"I cannot state strongly enough that, given the seriousness of the shortcomings identified in the Specialist Audit, if I were not so concerned for the students and their transition to other educational opportunities, I would not be offering the board this final chance," she wrote.

Katrina Casey, Ministry of Education head of sector enable-ment and support, told the Northern Advocate that now a formal decision had been made about the kura, the ministry would "enter into formal negotiations with the trust around all elements of the closure".

Asked why negotiations were needed when the reimbursement of Crown funding was part of the agreement to keep the school open, Ms Parata said closing any school was complex.

Nga Parirau Matauranga Charitable Trust chairwoman Dee-Ann Brown said the trust would not be commenting.

Ms Casey said the kura had received $5,234,149.21 (excluding GST) in establishment and annual payments. Part of the recoverable sum includes funding paid for the first quarter of 2016. Ms Brown said the school owned land and buildings with a book value of $1.16 million and estimated sale value of $750,000.