The country's biggest real estate firm has reached a settlement with a young family who unwittingly bought a home next door to a drug and alcohol rehab centre housing recovering addicts and former inmates.

The family sued Harcourts agent Michael Robson and his Mt Eden-based firm Charlton Realty Ltd last year and sought more than $280,000 in damages and costs.

They purchased the home, marketed by Robson as "family perfection", in early 2014 for $1.325 million.

But they later learned it was next door to a Wings Trust substance addiction rehabilitation facility.

Advertisement

Robson admitted knowing about the centre but did not to inform the buyers before they bought it at auction.

He later apologised. He was found guilty of unsatisfactory conduct before the Real Estate Agents Authority for withholding information, censured and fined $5000. Charlton Realty Ltd was also censured and fined.

The family tried to reach a settlement with Harcourts, arguing they had paid too much for the property and would never have bought it had Robson told them about the next door property.

When this failed, they filed legal proceedings in the High Court alleging negligence and breach of the Fair Trading Act. They sought $230,000 in damages, plus $50,000 for distress, at least four years' interest, and costs.

Harcourts had defended the case, which had been due to go to a hearing in March. The company argued the couple were not financially disadvantaged and that they paid fair market value for the home.

Harcourts commissioned a valuation report in its defence. Its valuer Evan Gamby argued a "prudent" buyer should have undertaken proper due diligence. The Wings Trust property was owned by Housing New Zealand, which was "readily discoverable" to prospective buyers.

In an interview earlier this year, the couple spoke of the "devastating" emotional and financial toll of taking legal action against the corporate heavyweight.

"We are a single income family trying to support three kids," the husband said.

"It's consumed us. We've never been able to be fully happy in this house because of the situation next door, and the drain and emotional toll the court case has taken on us is unbelievable."

With full disclosure, the family would have "run a mile".

The family, who still live in the house, commissioned its own valuation report to quantify their estimated loss.

The report noted the centre's clients included criminal offenders "with addictions to alcohol, cannabis, minor tranquillisers, opiates, hallucinogens, amphetamine-like compounds and/or solvents".

It estimated disclosure of the centre to prospective buyers would result in a price discount of 10-15 per cent due to the "impact of perceived threats".

"There would, in my opinion, be significant buyer resistance, particularly with the knowledge that at least some of the occupants would or could have been referred to the property by the court system."

A statement of claim filed by the couple's lawyer, Adina Thorn, said Robson knew a safe and secure property was imperative for the family. Had they known of the addiction centre the family would have abandoned the sale or "incorporated a discount in the purchase price to reflect the uncertainty and risks".

A court spokeswoman yesterday confirmed that a settlement had been reached earlier this month. Neither Thorn nor the couple would comment, with Thorn issuing a statement saying the proceedings had been "discontinued". Robson and Harcourts also declined to comment.

"All parties have signed confidentiality agreements so I can't really comment at all," Robson said.