Auckland iwi Ngati Whatua says it is "surprised and disappointed" that the Crown did not engage with its members about plans to develop surplus land for housing.
The iwi also confirmed this afternoon that it had instructed its lawyers to advise on the legality of Government's plan to develop up to 500 hectares of land in Auckland, in particular its claim that Auckland iwi did not have the first right of refusal.
Deputy Chairman Ngarimu Blair said the iwi had taken a keen interest in the proposal to release Crown land in Auckland for housing purposes.
"We recognise, and are concerned about, the significant shortage of land available for residential houses in the Auckland market," he said in a statement.
"We have experience in this area and would like to be part of the solution. We would be happy to evaluate the opportunity at market value."
Earlier today, the Maori Party asked the Government to "please explain", saying that the decision to override the iwi had significant implications for all Treaty settlements. Labour also criticised Government's dealings with iwi, saying that it threatened to derail one the major housing policies announced in the Budget last month.
Housing Minister Smith insisted the process was on solid ground. He had been advised that Ngati Whatua's Treaty settlement did not give it right of first refusal in Auckland.
This right was, however, included in a separate settlement with the Tamaki Collective, a group of 13 iwi which included Ngati Whatua. He said the collective was consulted on the surplus land sales in April but this information might not have reached Ngati Whatua.
Dr Smith said the Government's Treaty settlement with the Tamaki Collective, which was passed into law last year, also had a provision which allowed Government to develop and sell land for housing purposes. He pointed to a clause which said the Crown could dispose of land which was "held for state housing purposes".
"The advice that I've received both from my own Ministry and Crown Law is that the term 'state housing purpose' means more than just houses from the Housing Corporation," he said.
The same provision had been used to develop land at Hobsonville and Awatea for housing, without breaching any Treaty deals.
But critics said the Government was negotiating in bad faith, and appeared to be favouring overseas developers who had shown an interest in the surplus land.
"Ngati Whatua simply want to build affordable houses for the people of Auckland. So why is he trying to cut them out of a deal?" Labour's housing spokesman Phil Twyford said.
"I think the whole thing could be derailed if iwi have in fact not been properly consulted and they choose to go to court over this."
Maori Party co-leader Marama Fox said right of first refusal was a standard provision in most Treaty settlements and was partly to recognise the "paltry compensation" paid to iwi for their losses.
"It is antithesis to good faith obligations on the part of the Crown to on the one hand offer apologies and compensation to iwi through their Treaty settlements, and then completely ignore them when it is convenient to do so," she said.