Police are treating as suspicious a fire that gutted a 100-year-old building in Coromandel yesterday.

The historic Moehau Tearooms, which are at the centre of a protection dispute, were irreparably damaged by the blaze.

The Coromandel volunteer fire brigade was called to the building at 2.50am, but the inferno had already consumed most of the building.

Patrick McLean, who works at the Admirals Arms Hotel opposite the tearooms, saw an orange glow coming from across the street.

"It was a massive fire. Flames were leaping about 10ft into the air. The whole roof was on fire," he said.

Thames Coromandel District Council senior building control officer Alan Benson said the building was now under a demolition order.

"It's now deemed to be a dangerous building. We will basically advise the owner it needs to be pulled down," he said.

Constable Peter Easton of Coromandel said last night that police suspected arson and were interviewing witnesses.

"A report on [the fire investigator's] findings is yet to be completed. However, police can confirm the fire is being treated as suspicious and their inquiries are continuing into finding who was responsible."

The historic square-fronted colonial building was built in the heart of the region where gold was first discovered in the 1850s.

The tearooms featured in the New Zealand film Sleeping Dogs and were once a popular fish-and-chip shop.

They have been vacant for almost seven years.

The tearooms were listed by the district council as being of historical importance and were registered as the key building in the council's heritage policy area on Wharf Rd. The site was singled out for development by Wharf Investments in 2007, which sought permission from the council to demolish the building for a block of apartments.

The council relaxed its protection policy this year, agreeing that the building could be demolished, but it sought the agreement of a protection committee.

The case was due to be settled in the Environment Court this Friday.