The city council is now facing two separate lawsuits with Bella Vista homeowners vowing to "fight this through to the end".
Nineteen of the homeowners announced today at a press conference that they would be filing their own legal proceedings against Tauranga City Council.
A class action has already been filed and served on the council on behalf of the other two Bella Vista households. It is due to have its first court conference in the coming weeks.
This afternoon, the group of homeowners and about 50 supporters and members of the public gathered at the failed development site at The Lakes.
Sarsha Tyrrell, speaking on behalf of the 19 homeowners, said they had found themselves caught up in a battle between the council and its insurers.
Her comment was in response to the buyout offer put forward by the council last week.
The council offered to buy the 21 Bella Vista properties, but not at the market value homeowners wanted.
Tyrrell said the council had offered to pay the same price the homeowners paid nearly three years ago for their houses.
She said in their view it was an offer which would "strip many of us of an opportunity to potentially ever own a home again".
Tyrrell said the homeowners' opinion was that the council, as an organisation, had broken its own rules and failed to adequately perform its job.
"For that, we are now being punished and through no fault of our own, we have found ourselves homeless."
She referred to the recommendations made by former High Court judge Paul Heath QC, who conducted an independent investigation into the council's role in the failed development.
In his report, Heath found the council acted correctly in some areas but failed in others.
Heath said in the report: "As the council is, in reality, the last target for litigation from which recoveries are likely, the benefits of early resolution far outweigh any desire to have the homeowners' claims tested in court."
He said there were "good legal, economic and humanitarian reasons" for the council to try and settle and attempt to restore homeowners "to the position they ought to have been in had the development been successfully completed".
Heath assessed the council's risks of unsuccessfully defending proceedings brought on the basis of its (various) inadequate performance of regulatory functions as "significant".
Tyrrell said the homeowners believed this was a situation the council could "very easily remedy" by restoring the homeowners to the position they would have been in "had the council properly carried out the work we trusted them to do".
She said what the homeowners were asking for was not unreasonable.
In the homeowners' opinion, "it has become apparent that the council is not prepared to do what is fair and just in this situation. And therefore, we have no choice but to issue proceedings and turn to the legal system for help."
She said it was also important to note that last week's offer was conditional – the council would only agree to settle if all 21 homeowners accepted it.
Another homeowner, Andre Stewart, said regardless of that condition, the group had always stuck together.
He said strength in numbers would always outweigh any kind of splitting off.
"We will fight this through to the end, as I think anyone would," Stewart said.
However, he said this was still a negotiation and the homeowners were still willing to hear from and talk to the council moving forward.
Homeowner Jenny Coffey said the group of 19 were sticking with their Tauranga lawyer Nathan Smith, "and he's going to take us through the court proceedings".
Coffey said the group did not want to take legal action, but felt like they had no choice.
"We want to be able to purchase a home in the current market."
The other two Bella Vista homeowners are also proceeding as planned with their class action against the council.
When the Bay of Plenty Times put questions to the council yesterday in regards to the homeowners' announcement of legal action, council chief executive Garry Poole said: "When we receive the homeowners' response to the offer, we will consider it. The negotiations are confidential."