Queenstown's council has launched an investigation into claims of a brothel operating outside the permitted zone.
Three women sex workers are understood to be meeting clients in a unit just 200m from St Joseph's Catholic Church and school.
Queenstown has strict rules covering the sex trade, with a bylaw restricting brothel operations to a small area of the CBD.
A member of the public, who does not want to be named, says: ''Neighbours are sick of it - there's people in and out the door all night, 3am, 4am.
''The council closed it down about six months ago but they just stopped for a month then came back.
''It's the same girls coming and going.''
The three women, apparently all in their 20s, advertise their services on a national website.
St Joseph's principal Trisch Inder said: ''I wasn't aware of this. I never respond to rumours but it's something I'd raise with the board.
''Kids' safety is paramount at the end of the day and if it was jeopardised in any way the board would act.''
All three women declined to comment when approached.
Queenstown Lakes District Council regulatory manager Lee Webster said if the complaint was substantiated, he would issue a warning that the activity must cease immediately or the property owner would be prosecuted.
If a conviction followed, the owner could be fined up to $20,000.
Prostitution and brothel keeping is legal in New Zealand but Queenstown bylaws limit the activity to the CBD area. - Mountain Scene
by Paul Taylor
