I don't think the adjuncts are modifying anything, I'd say they were only adding information to explain illegal which I think is described as a causal adjunct.[a]
The original sentence could be written as simply as
The council appears to be guilty of the illegal sale of houses.
And an adjunct explaining what made the sale illegal is added
The council appears to be guilty of the illegal sale of houses that were not its to sell.
And another adjunct is added to the first adjunct to reinforce that the council did not own the houses it sold and did not check if it did.
The council appears to be guilty of the illegal sale of houses that were not its to sell in the first place.
In the first place is adjunct to that were not it's to sell and means This [ownership of the houses] is the first thing the council should have checked before selling them.
a: Causal Adjunct. from Wikipedia contributors. "Adjunct (grammar)." Wikipedia, The Free Encyclopedia. Wikipedia, The Free Encyclopedia, 6 Sep. 2014. Web. 25 Sep. 2014.
Causal - Causal adjuncts establish the reason for, or purpose of, an action or state.
The ladder collapsed because it was old. (reason)