"When I purchased it, it became all part of one lot, so it's treated as prime office space, even though it's an unusable laneway; it's all zoned the same," she said. "As a result, the Valuer-General treats every square metre of laneway as prime land for the collection of land tax.

"It's now costing me $50,000 a year in rates. Others have easements over the lane, but have refused to pay any remuneration, or anything towards the bills, which is grossly unfair."

Three of the other buildings that border the laneway have easements – or rights to use the lane for certain purposes, such as fire exits, rights of way and garbage collection – over the land and Mrs Arcidiacono feels that they have blocked her from doing anything.

The row escalated when Mrs Arcidiacono put up a gate at the entrance restricting its use. An injunction was served against her, the gate was taken down and Mrs Arcidiacono took everyone else to court, fighting to restrict their rights to use their lane.

"That laneway is so expensive for me, yet I'm being stopped from developing it," she said. "Sydney Council say they want to activate spaces like that, and put life back into the city, and that's why I thought they sold the laneway to me," she said.

At the moment, the laneway, with its metal cartway lanes and cobblestone finish still mostly intact, is used mostly for garbage bins, bags of rubbish and milk crates full of empty containers, as well as a place for smokers to toss their butts, and for the occasional homeless person to sleep.

"This is a row over a little laneway which is completely useless, that has no economic use at all," said lawyer Carlo Fini, of JS Mueller & Co Lawyers, who acted for 65 York Street . "But we're fighting over it."

Ray White Commercial office leasing director John Skufris said there was a big demand for sites for small laneway bars since the City of Sydney launched its laneways business program in 2008.

"They're happening particularly in the western corridor of the CBD and it's become a bit of a hub for small bars," he said. "The supply of commercial space for them is low at the moment, so they're even more in demand."

Mr Fini said the case highlighted a real issue for the city. "So much real estate in Sydney is unoccupied now, and no one knows who the owners are," he said.

"That's particularly true for a lot of these old laneways whose owners go a long way back into history. It can create real problems, with people unable to exploit them because of easements."

Mrs Arcidiacono took action in the court to have the easements belonging to 65 and 71 York Street – created way back in 1839 – declared invalid, as well as more recent additional easements for 65 York Street – enacted in 2003 when the building was being strata subdivided – cancelled too.

The rights to the land originate from the early days of the colony when the so-called 'Father of Australia', Governor Lachlan Macquarie, gave a Crown grant of the area between York, Clarence, Barrack and King streets - used at one time as a barracks - to Hugh MacDonald, a quartermaster in the 46th Regiment.

Mr Fini, who has researched the background, said in 1839 the MacDonald family sold what was now 65 York Street and 71 York Street, but granted both new owners rights of way over the laneway.

Much later, in 2003, 65 York Street asked for further easements and, with the owners now unable to be traced, the Supreme Court made the orders in their absence.

The Arcidiaconos challenged the easements but the Supreme Court ruled they were valid and ordered them to pay the legal costs of the winning parties.

While Mrs Arcidiacono said the case had so far cost her tens of thousands of dollars, she was now considering appealing.