Housing New Zealand has taken a test case to Napier District Court seeking thousands of dollars in damages from criminals who made illegal drugs in a state house.
The property was so badly contaminated it had to be demolished.
Housing New Zealand says the costs involved were beyond the jurisdiction of the Tenancy Tribunal so they were forced to go through the courts.
It was seeking $180,000 from from six people convicted in relation to the manufacture of the methamphetamine, also known as P, at a house in Napier.
In July 2004, police raided the Housing New Zealand property where P was being manufactured five days a week and arrested nine people.
An inspection of the house showed walls in the lounge kitchen and one bedroom were heavily stained with chemical residue. It was demolished in 2005.
A lawyer for Housing New Zealand, Nick Flanagan, told the court on Monday that the agency held those convicted of manufacturing methamphetamine liable for the damage.
Property Investors Federation vice-president Andrew King says the claim, if successful, will set a precedent for the industry because it will be another way for landlords to recover investments if they cannot claim insurance.
Mr King says companies often will not pay out for damages unless regular inspections are carried out.
He says the association is trying to educate landlords about the problem. Landlords should be vigilant about inspections and call police if there is any sign of illegal activity.