It also ruled Mr McMillan "was in breach of his obligations to keep the property reasonably clean".
Now council is asking the tribunal to end the tenancy and to use the bond to clean the unit.
It says the flat, among other things, has urine on the toilet floor, that there is filth, food and dirt pressed into the carpet and that a washtub is caked in scum, and full of odorous dirty water.
"On the basis that the unit is very, very dirty, unclean and untidy as well as a health risk," Whanganui District Council's pensioner housing property officer Carly Barton told the tribunal.
She said council gave Mr McMillan 14 days to clean the flat on April 11 and the small attempt made did not satisfy council staff.
"As you can see, it clearly states what we would like remedied. Donald advised us that he was not going to.
"I try and work with my tenants to try and build a relationship and not dump it all at once, so to speak.
"This is the first in five years that I have not been able to build a rapport and find an outcome. To be honest I was hoping we would have a different outcome here."
Council senior property officer Bill Carswell was called as a witness and said Mr McMillan "just didn't seem to understand why we were upset at the state of the unit, that we felt that it wasn't up to standard".
"It was just the cleanliness that really beggared belief. It's just not in a fit state for anyone to live in really," he said.
But Mr McMillan instead wants the clause relating to keeping the flat clean and tidy be removed from his tenancy agreement.
"I want that rendered null and void," he said.
"[There are] no details given and it means different things to different people.
"The Residential Tenancies Act (RTA) section 40c states that the tenant must keep the property reasonably clean and tidy.
"The Whanganui District Council is perverting the RTA by taking out the term 'reasonably', by putting this clause in the tenancy agreement."
Council had contacted Age Concern to see if home help would be available for Mr McMillan.
Funded help wasn't and Mr McMillan said he would not pay for a cleaner.
"I look after the place quite okay on myself. Why would I spend money on something I don't need."
Mr McMillan has also asked the tribunal to order council to carry out a number of maintenance related tasks.
The council did indicate it was possible an agreement could still be reached.
Adjudicator Lyon adjourned the hearing and a full day will be set down for it to resume.
She indicated a site visit was possible.