The Government's plan to sell more than 1100 state houses in Tauranga has been labelled "illegal" and "irrational" by a lobby group fighting the proposed transfer.

The sale is being challenged in The High Court today, with ministers accused of not knowing enough about the contracts.

Lobby group State Housing Action in the High Court at Wellington on Wednesday argued the proposed transfer of the 1124 properties to IHC subsidiary Accessible Properties was illegal because the minister hadn't considered a transfer contract as they were required to do.

Its other argument is the decision to sell was irrational and Housing Minister Bill English and Social Housing Minister Paula Bennett hadn't taken into account relevant matters.

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The Government wants to sell about 2000 of 64,000 Housing NZ properties to social housing providers, who must then make them available to social housing tenants. The transfer of 280 properties in Invercargill has already fallen through and SHA believed the precedent-setting Tauranga deal represented the sale of $200 million of state assets, the group's lawyer Michael Sharp told the court.

Ministers didn't have to read all of the 400-page document but must have knowledge of the terms of the contracts they were signing, he said. Lawyers for the ministers are expected to argue they only have to have knowledge of key aspects of the contracts.

The court was told the public might be cleared during parts of the one-day hearing when commercially sensitive matters are discussed. It is hoped Justice Simon France will make a ruling before a December 9 contract deadline.

State Housing Action Incorporated had filed papers seeking a judicial review of the sale.

State Housing Action Incorporated secretary Vanessa Kururangi earlier said the group's lawyer had reached an agreement with the Government that when it officially announced the sale of Tauranga's state houses to Accessible Properties, the group would be given access to commercially sensitive data to help prepare for court.

"We're quite prepared for the court case, " she said.

Ms Kururangi said she did not expect a large contingent of people to be at court but State Housing Action groups based near Wellington might come along.

"It will be good to get some serious answers and have our concerns addressed officially. I'm excited, and nervous as well."

A spokesman for the Government's Social Housing Reform Programme earlier said that transfer negotiations were ongoing.

"Whatever the court decides we will work to ensure the best possible outcome for Tauranga tenants," the spokesperson

Accessible Properties New Zealand was expected to become the new landlord around April next year, the spokesman said.

All the properties transferred would have to remain in use as social housing and could not be sold unless the Government agreed otherwise.

- additional reporting NZN dwi/bsh_AAP