The High Court has reserved its decision on whether Wellington City Council was wrong to grant consent for a brothel to expand its operations in a residential street.
In 2007, the council approved an application by The Lovely Lilly, situated in the Wellington suburb of Mt Victoria, to extend its rooms and hire up to five workers.
The brothel had previously been limited to three staff.
The Mt Victoria Residents' Association challenged the council's decision in court on Monday.
The association's lawyer, Tom Bennion, says the council should have considered the nature of the business under the Prostitution Reform Act.
The association argued the council was wrong to rule out public consultation when granting the resource consent.
Residents said Section 15 of the act, which would have required an assessment of welfare issues such as safety and clients mistaking other houses for the brothel, should have been part of the decision process.
However, the council argues the act does not set out a specific course of action.
The lawyer for the brothel owners, Chris LaHatte, says his clients will have to cut back their operation and may even close if the court rules against the resource consent.
