A SOUTH Australian council has dropped controversial plans to sell its $300,000 caravan park for just a tenth of its value.

The local community had battled for more than 20 years to get its own caravan park and residents were over the moon when the 16-site Lameroo Lakeside Caravan Park, about 210km south-east of Adelaide,  was finally opened in 2007.

But their joy turned to outrage when South Mallee District Council recently announced the park would be sold for $30,000.

Now, after receiving legal advice from its lawyers on the park's community land status and a 217-signature petition from protesters, councillors have decided not to go ahead with the sale.

"The legal effect of this advice was that the council decision to sell was not valid and so the sales process for the caravan park was terminated," a council report said.

Councillors considered two options ... to revoke the community land status or find someone to take on a long-term lease to achieve "a cost effective financial return".

"The concerns of the Lameroo residents also featured in feedback from the public over the proposed sale and so a lease with annual returns instead of annual costs would be an acceptable alternative to a sale in this instance," the report added.

The council agreed to engage Gojowist Pty Ltd as interim managers of the caravan park but will launch a public consultation process to find someone to take on a lease for between five and 21 years.

South Mallee District Council chief executive officer Rod Ralph had previously claimed the council could not afford "much needed" upgrades to the four-year-old waterside park.

In a business profile of the park, the council said it was prepared to enter into any long-term lease up to 21 years provided the parties could agree on minimum expectations for improvements.

This included accommodation options and the availability of amenities "for the enjoyment and pleasure of those using the park's facilities".

The council also said the primary reason for shedding its responsibility for the park was "to allow private enterprise the opportunity to show council that it can manage or own the caravan park and provide outcomes which may well be better than what council can do under the current management regime".