A family is suing a high flying real estate agent for hundreds of thousands of dollars for failing to tell them the pricey Mt Eden villa they bought was next door to a drug rehab centre.

Harcourts agent Michael Robson is one of the firm's top-selling agents with a string of accolades during his stellar 20-year career.

But he has apologised to the family and been reprimanded and fined by the industry watchdog after being found guilty of unsatisfactory conduct over the sale.

The family say they had no idea they would be living next door to recovering drug and alcohol addicts and have been "severely financially disadvantaged."

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They are now taking Robson and his agency, Mt Eden-based Charlton Realty Ltd, to court, seeking financial damages.

Experts say the case has wider disclosure implications for properties situated near gang pads or known P houses.

The complainants, referred to as Mr and Mrs C, bought the house in the upmarket central Auckland suburb at auction in February 2014.

They told Real Estate Agents Authority (REAA) investigators the property was marketed as a "family-friendly" home in a quiet street. There was no signage or any other indication as to the nature of the rehab centre, which "has the appearance of an ordinary family home".

They said Robson knew of the centre's existence prior to them making a successful bid.

He was also aware they had a young family, and that a safe and secure home environment was of paramount importance to them.

The couple said they only learned about the addiction centre two weeks before settlement. They still live in the house.

"Subsequent to purchase they have made a number of disturbing observations of the centre, including police attending on three occasions, a resident displaying an electronic monitoring anklet, and the Fire Service attending to put out a fire caused by a discarded cigarette," the REAA decision states.

Robson told the authority he only learned about the centre while researching the vendor's property after an open home and realising the house next door was owned by a corporation.

He queried this with the vendor who confirmed it was an addiction treatment centre, but they said its occupants had been "the best of neighbours with whom they shared a good relationship".

"He decided on this basis that he did not consider that he was obliged to disclose the existence of the centre to the complainants although it was a finely balanced decision."

Robson told the authority he did not believe the purchase price was over-inflated.

"I do reiterate there was no ill intention on my behalf. I genuinely believed that it was not the sort of matter that needed to be disclosed ... and will not make the same error again."

However, the REAA ruled Robson's actions were unacceptable and a breach of his professional obligations.

He should have disclosed the existence of the centre to the complainants at the earliest reasonable opportunity. Not doing so suggested he knew it "might deter purchasers".

"The purchasers of a good family home in a prosperous neighbourhood would very much want to know about the presence of the centre next door before deciding whether or not to buy," the authority said. "The general house buying public would undoubtedly consider it unfair for such information to be deliberately withheld."

Both Robson and his agency were fined $5000 but the authority did not award compensation to the family.

The complainants have now filed civil proceedings in the High Court seeking financial damages relating to lost value, "stigma" and distress.

They allege misleading and deceptive conduct under the Fair Trading Act, and negligence under the Real Estate Agents Act.

If successful, compensation could run into the hundreds of thousands of dollars.

Adina Thorn Lawyers associate Kate Sheehan said her clients had been put in a difficult position. They would now have to disclose the centre to prospective buyers which was likely to affect the value of their home.

She planned to present expert evidence about the monetary effect of the neighbouring treatment centre on her clients' property.

"It did affect these people because they wanted a family home and that's the way it was advertised.

"If you had a P-contaminated house next door you'd probably want to know about that too."

Robson told the Herald he was sorry but unable to comment as the matter was now before the courts. Harcourts also declined to comment while legal proceedings were underway.