Kaipara ratepayers will not have to pay an additional penalty on any rates that were outstanding as of the end of June.
The council has acknowledged it cannot charge an additional penalty on previous year's rates until such times as it has set the 2012/13 rates and associated penalty resolutions.
The council recently wrote to about 2500 ratepayers who had outstanding rates balances (as at June 30, 2012) advising it would be levying an additional 10 per cent penalty on the balance outstanding as at July 10.
This levy was in addition to the penalties already imposed on any rates outstanding after each instalment notice.
Last week in a letter to Kaipara chief executive Steve Ruru, Mangawhai resident and retired barrister Clive Boonham challenged the council on the legalities of the penalty, quoting several sections of the Local Government Act to back his argument.
On Monday, Mr Ruru responded to Mr Boonham saying he had looked into the issue further and agreed there had been an error on the council's behalf for which he apologised.
"As a result, the council will not be proceeding with the imposition of this penalty. This is a matter we should have investigated further before the letters were sent and so I apologise for that," said Mr Ruru.
Council spokeswoman Barbara Ware said the levying of such an additional penalty was provided for in the Local Government (Rating Act) 2002 and was a standard part of the rates collection processes used by many local authorities.
"However, before the penalty is imposed, there is a need for the elected council to agree specifically to this action being taken.
"This would normally occur as part of the process of setting the 2012/13 rates.
"Since the finalisation of the 2012/22 Long Term Plan has been delayed to enable us to fully consider all the submissions we received, we have not yet set the 2012/13 rates and associated penalty resolutions."
A Kaipara Citizens and Ratepayers member said: "Apologies are fine, but Steve Ruru's letter caused a lot of distress to many ratepayers across the district.
"This follows close on the heels of the draft LTP which also caused massive anguish amongst a large section of the community.
"One has to question whether this council really cares at all about its responsibility to ratepayers and the four well-beings that are supposed to be the basis of all its actions."
The interim rates proposed for the 2012/13 will remain unchanged.