Dozens of homeowners could be entitled to a cash windfall of thousands of pounds after a local authority was ordered to refund council tax overpayments dating back over the last 30 years.
And while the local authority initially believed no back payments would be required it is understood Lothian Valuations Joint Board (LVJB) which ordered the review has told them to repay the money.
Council leader Norman Hampshire has insisted the cost to the local authority is not considered to be "significant" when compared to the estimated £70 million income from council tax it will receive over this financial year.
However council sources have said the decision sent shockwaves through senior management who could now face paying out hundreds of thousands of pounds as well as devoting a team of workers to tracking down every council tax payer who lived in the houses involved over the last three decades.
The LVJB carried out an investigation into council tax bands in the town after a number of appeals raised concerns there was an inconsistency among similar houses.
The investigation saw 127 houses moved up a band while 79 were moved down.
There has been no suggestion the homeowners moved up a band will have to pay any underpayments with the new bands introduced from August 1. However those who were paying too much will be now contacted by the council over potential refunds.
Some of the houses which have been moved had been on the same band for more than 30 years. And it is unclear whether the local authority will be expected to hunt down previous owners for houses which changed hands or face claims from tenants who may have been responsible for paying the wrong council tax while renting houses from landlords.
One source said: "It is really very complex and we have no idea how far the refunds will go or how much it will cost. The decision by the board is unusual and has everyone scrambling for answers."
Residents in Haddington were shocked to receive letters from Lothian Joint Valuation Board (LJVB), which sets band levels, last month saying they were being moved – with the majority going up at least one band.
One resident said he though the letter was a scam when it arrived.
He said: “I’ve been a Band C since 1991, now I’m being told it should have been a Band D and my council tax will go up from next month. I couldn’t believe it.”
Assessor for the LJVB Gary Elliott said of the changes: "Decisions to amend bands are not taken lightly but where inconsistencies are found and a banding is clearly incorrect it is the correct thing to do, not least to ensure all council tax payers are treated equitably."
The council tax payment alone for 2022/23 for a Band D house in East Lothian is £1,314.69 while Band E is £1,762.84 - in 2017 when a decade long council tax freeze was lifted Band D move up 3% to £1. 151.15 while Band E was £1, 512.48.
In both cases it means houses moved down from those bands would be entitled to around £400 a year refunds for each year they paid.
Councillor Hampshire said: "Our council tax team will be updating our records to reflect the changes and will issue revised notices over the next few weeks.
"For residents whose property band has reduced with a retrospective effective date, and where there is entitlement to a refund of overpaid council tax, the team will be in touch as soon as possible to make arrangements to pay this money back.
"‘The financial impact of refunding overpaid council tax to those who are entitled is not considered to be significant when set against the income received from over 51,000 properties."
The LVJB said decisions over refunds were a matter for East Lothian Council.