Owners of million-dollar lots at the Hokuli'a subdivision in South Kona want Hawai'i County to pay them $265 million for losses they suffered after a court halted the luxury development.

In an eight-page letter to Big Island Mayor Harry Kim, attorney Robert Baker, who is representing 96 Hokuli'a lot owners, accused the county of breach of contract and negligence for failing to issue building permits for the 750-unit project.

The buyers have lost an average of $1.2 million each as a result of the county's actions, Baker said in the letter.

"The injury suffered by these lot owners is a direct and proximate result of the malfeasance of the county," Baker wrote.

Big Island Corporation Counsel Lincoln Ashida declined to respond to Baker's specific remarks but said his office plans to evaluate the lot owners' claims in a fair manner like "all other claims brought against the county."

The Hokuli'a project is a 1,540-acre luxury development on agriculture-zoned land that is being built by 1250 Oceanside Partners, a joint venture between Arizona developer Lyle Anderson and Japan Airlines.

The project broke ground in 1999 after 1250 Oceanside obtained county approval to build one-acre housing lots. But the development was halted in 2003 when Big Island Circuit Judge Ronald Ibarra ruled that it was illegal to build luxury homes on property zoned for agriculture.

The developer and the county have appealed the ruling to the state Supreme Court.

As a result of Ibarra's ruling, Hawai'i County officials decided not to issue building permits to Hokuli'a's lot owners, according to Baker.

Baker, a partner in the Los Angeles law firm of Baker, Kenner & Nahra LLP, could not be reached for comment on his letter. But in a news release, he said that the administrative claim is the first step in a lawsuit that seeks to overturn Ibarra's ruling.

Baker said his clients would prefer to avoid litigation and settle the dispute in a way that preserves their property rights.

Baker had threatened to sue the county in February and later met with county officials but both sides failed to resolve the dispute.