Kiwi America's Cup icon Sir Michael Fay has resigned his 46 year membership of the Royal New Zealand Yacht Squadron in protest at the club's decision to sanction the sale of venue and hosting rights for the next Cup defence by Team New Zealand.

Fay, along with fellow Cup luminaries Alan Sefton and Andrew Johns wrote an open letter to Commodore Aaron Young on Thursday, detailing the club's "regretful approach to its obligations as Trustee of the America's Cup".

The trio argued that under the terms of the historic Deed of Gift, the squadron has "no licence" to relocate the venue offshore, along with the fact that the decision means that New Zealand will miss out on the numerous benefits of a Cup defence.

They highlight the relevant Deed of Gift passage: "It is distinctly understood that the Cup is to be the property of the Club subject to the provisions of this deed, and not the property of the owner or owners of any vessel winning a match."

The 37th defence of the America's Cup will be held in Barcelona, after the Catalan capital won the rights in March following an international tender that saw bids from cities in Europe and the Middle East, in a process that commenced before last year's successful defence in Auckland.

Fay is considered the godfather of the America's Cup in this country, while Sefton and Johns played prominent roles in New Zealand's pursuit of the Auld Mug.

Fay kickstarted it all with his KZ7 campaign in 1987, which captivated the nation like few events before or since. He also ran the Big Boat challenge in 1988, along with the 1992 campaign with NZL20 in San Diego.

Johns was Fay's legal and rules advisor throughout those campaigns and is one of the world's foremost experts on the Deed of Gift.

After working as an advisor to Fay during his three challenges, Sefton formed Team New Zealand alongside the late Sir Peter Blake, helping to oversee the historic 'black boat' victory in 1995 then the successful defence in 2000.

Sir Michael Fay. Photo / File.

Between them the trio have been RNZYS members for almost 150 years.

Sefton said the move wasn't taken lightly, but they felt compelled to act.

"This is in danger of just slipping under the radar, if nobody puts their hand up and says we shouldn't be doing this," Sefton told the Herald. "This is wrong. If no one else is going to do it, we will and hopefully someone will listen."

Sefton said the last straw for a frustrated Fay was when he recently read on a sailing website that 'Team New Zealand didn't owe anybody anything.'

"Michael really lit up about that," said Sefton. "That goes against everything [Sir] Michael believes in. Right from day one, the whole reason he set up the team and chased the Cup for all those years, it was all about New Zealand and what the Cup could do for New Zealand, on so many levels. He is very conscious of how the New Zealand public get behind the America's Cup and how much fun they have had with it, apart from everything else."

Sefton said RNZYS had no mandate to "give the Cup away" and instead should have taken the lead to explore every possible avenue to stage the defence here.

That should have included getting all the parties, including prospective Cup investor, Greymouth businessman Mark Dunphy around the table with an arbitrator.

Sefton said Johns drafted a letter to RNZYS commodore Aaron Young last October.

That document argued that the Deed of Gift has no provisions that give the defender the right to take the venue outside its home waters.

CEO of Emirates Team New Zealand Grant Dalton looks on before America's Cup Race #10 in 2021. Photo / Photosport.co.nz

Sefton told the Herald that letter hadn't received a reply from the RNZYS, though Team New Zealand boss Grant Dalton had emailed a response.

"Why is Grant answering for the squadron now?," asked Sefton.

Sefton argued that the figures touted by Team New Zealand and RNZYS to justify an offshore defence "don't make any sense".

For Sefton, it was also sad to reflect on the effort involved to achieve the impossible and bring the Auld Mug here, from the genesis of Fay's early plans in the mid 1980's to the triumph a decade later.

"When we picked up the baton from Michael, we needed to raise $30m for a two boat campaign. We did it, took it on. There was no fat in the system - it was lean as, but we did it and that become the most powerful sports team I've ever had anything to do with."

"All that is gone. Because Dalton said so, we have decided to give it away. I can't understand that at all …why would you give away the America's Cup?"

Sefton said claims about the ongoing economic viability of Team New Zealand are a red herring, which should not be linked to the defence location.

"They will argue that this is the only way they can ensure the future of the team," said Sefton. "But this is not about the future of Team New Zealand. If Team New Zealand can't survive and Dalton can't make it work financially, we will have to move on and find another solution. What that is I don't know but there always is one out there, we just haven't looked."

Most of all, Sefton, Fay and Johns are stunned that RNZYS and Team New Zealand have taken such a drastic step, after the "emotional magic carpet ride" of the last 40 years.

"Little ol' NZ has spent so much time and invested so much emotion and endeavour in winning the damn thing in the first place, for the right reasons," said Sefton.

"Those reasons proved to be correct in that it would be hugely beneficial to the country and the industry that goes with it, if we won it and could bring it back to New Zealand. Now we are going to sell it? Why give the benefits to Barcelona?"