The London Borough of Lambeth will use private sector solicitors to rectify a problem caused when its own legal team unwittingly sold off part of a tenant's house.
The blunder, outlined in a report by the Local Government Ombudsman Edward Osmotherly, occurred when the tenant's neighbours bought their council house in 1992 and gained ownership of an alleyway which provided access to her back garden.
When the council lawyers sold the house they should have retained the alleyway and granted a right of way over it.
Lambeth, which earlier this year contracted out most of its legal services to several law firms around England, has acknowledged it made an error in disposing of the alleyway.
It will hand the problem to one of its new legal services contractors and pay the woman £500 compensation.
The council's action has won the approval of the ombudsman who said that although Lambeth was guilty of maladministration, it had accepted its failings.