The heritage hotel at the centre of a demolition stand-off was moving by up to 5 millimetres an hour towards the street when the decision was made to knock it down, the Auckland Council said today.

The 124-year-old Palace Hotel building in central Auckland was reduced to rubble following a council order in November last year to demolish it.

An Auckland Council commissioned report has found the Palace Hotel's owners, John and Michael Chow, failed to ensure the building was being safely renovated.

The Council is considering prosecuting the Chows following the report's findings.

Meanwhile a bill for more than $200,000 - the council's costs arising from the building's collapse - has been sent to the Chow Group.

An Auckland Council spokesperson said the report was couriered to the Chows this morning. Michael Chow told earlier today that he had not seen the report.

The Chow Group purchased the building on Victoria Street for $3.3 million in 2008 and were renovating it for use as a brothel, when cracks starting appearing in its walls.

Auckland Council's Building Control Manager Ian McCormick said the building had rotated and was constantly moving by up to 5 millimetres an hour towards the street before the demolition order was made.

Large cracks had appeared in the building façade and windows were spontaneously breaking.

He said an investigation by the council and three independent engineering consultancies, found that the collapse of the Palace Hotel was caused by its basement walls not being adequately supported during its renovation by the Chow Group.

McCormick said the investigation showed that the building owners failed to do all that was necessary to ensure the building was being safely renovated, and that the owners' site engineers and architects should have recognised the building was being placed at risk.

"The investigation shows the movement of the basement walls was due to a loss of lateral support caused by the removal of the timber floor, an over-excavation of the foundations and the removal of concrete basement floor designated to be retained in the approved plans.

"It was this combination of factors that caused the building to collapse."

The report also details the events leading to the collapse and the danger that the building's structural failure presented to the public and nearby properties.

"On the night of November 18 last year the council sought independent advice and were advised that a controlled demolition of the building was the only course of action to prevent it falling on to Victoria Street West or the buildings next door.

"The evidence shows the council had no option but to demolish the building in a controlled manner in the interests of public safety."

Just a day before its collapse on November 17, a regular council inspection had taken place.

The inspector was so concerned at the evident lack of support in the basement area that an instruction was issued citing non-compliance and the inspection failed, McCormick said.

"He instructed that no work was to be undertaken in the area of concern until the site engineer was available to inspect the works and report against the plans."

The report is also being referred to the Institute of Professional Engineers New Zealand (IPENZ) and the New Zealand Institute of Architects.