Investigations by the Auditor General's office into the sale of pensioner housing in Horowhenua by the district council have found the process used was legitimate.

A portfolio of 115 pensioner units in Levin, Foxton and Shannon and 1.1 hectares of land was sold by the council to Compassion Horowhenua, a company owned by Catholic charity Sisters of Compassion, and large Wellington property developer Willis Bond.

The sale price was $5.5 million, including $250,000 for a maintenance fund, although the council said at the time the portfolio's book value was the significantly higher amount of $7.191m.

Council chief executive David Clapperton said the lower price reflected encumbrances on the properties, including two suspensory Housing NZ loans totalling $5.2m, however the council was criticised for selling the housing off too cheaply, with Horowhenua mayor Michael Feyen calling the deal a "fire sale".

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A council press release last week said before the sale, an "independent market valuation" had placed a value of $3.8m on the portfolio, but it did not cite further details.

"The market book value of $7.191 million, while correct, is only of use if council had sold the portfolio with no conditions," Mr Clapperton said.

Criticisms were also aimed at deputy mayor and large-scale property developer Wayne Bishop for having a potential conflict of interest in the sale process.

Section 6 of the Local Authorities (Members' Interests) Act prohibits councillors from participating in discussions or voting on any matter in which they have a direct or indirect pecuniary interest, other than a common interest with the public.

The Auditor General's statement said the Act did not define what a pecuniary interest is, but the test used was "whether, if the matter were dealt with in a particular way, discussing or voting on that matter could reasonably give rise to an expectation of gain or loss of money for the councillor concerned".

The Auditor General's office said they understood Mr Bishop owned land next to the vacant land that the council had sold as part of the portfolio by Waimarie Park, but under the framework of the legislation, they were "unable to see" how the value of his land would be affected by the council's decision to sell the community housing, and how he could have a pecuniary interest in that decision.

Compassion Horowhenua is obligated to keep the units as social housing until 2029 if it wants the suspensory loans to be dropped at that time.

The company has said the bare land next to Mr Bishop's existing land was included in the deal to allow for the possibility of building more social housing in the future.

Sisters of Compassion manager Gerard McGreevy said last week the entire portfolio was still retained by Compassion Horowhenua, and as far as he was aware, none of the bare land had been sold or negotiated for sale.