Northland councils say a new marine law has stripped them of the right to charge rates for properties built over water and want it amended.
The Marine and Coastal Area Act 2011 replaces the Foreshore and Seabed Act.
The Far North District Council says the act has the effect of exempting from rates properties built over water.
The exemption affects 39 properties in the Far North, including the home of mayor Wayne Brown and the well-known Mangonui Fish Shop.
Far North Deputy Mayor Ann Court says the anomaly will cost the community $110,000 a year in lost rates revenue which she believes is unfair on other ratepayers.
Ms Court says the council is now having to refund rates paid in the last year by owners of the affected properties.
Local Government Association president Lawrence Yule says the situation is unacceptable.
"You can't have people not paying rates just on the basis that they live over water or their property is over water. It's been an unintended consequence of the change in the act in 2011 and it's got to be fixed."
Mr Yule says 16 councils so far have made submissions on how the new law will affect them and at least two have told the Government they stand to lose rates.