City of Cape Town's fixed charges declared unlawful | What the court has ruled
08 May 2026 | Sarah Sydenham
From 1 July 2025, the City of Cape Town (“the City”) added three brand-new charges to residential property owners' bills: a city-wide cleaning charge, a fixed water charge, and a fixed sewerage charge. None of these charges are linked to how much water you use or how much rubbish or sewerage you produce. Instead, they are calculated according to your property's value bracket: the more your property is worth on the municipal valuation roll, the more you pay.
For sectional title schemes, the City billed the body corporate as a whole, which left the community schemes industry debating how to recover these costs from individual owners, a problem we explored in our previous article on recovery methods.
Many groups challenged these charges in the Cape Town High Court, led by the South African Property Owners' Association (SAPOA) and AfriForum, supported by the Cape Town Collective Ratepayers' Association (CTCRA) and other interested parties.
Issue
The core question before the court was straightforward: Did the City actually have the legal power to impose these charges the way it did? More specifically: are these charges lawful service tariffs, or are they property rates in disguise, and does it matter?
Spoiler alert: it matters enormously.
Rules
Several pieces of legislation set the boundaries for what a municipality can and cannot charge.
The Constitution (section 229) says a municipality may only charge four things:
fees for services actually rendered,
surcharges on those fees,
property rates calculated as a Rand amount on market value, or
other taxes specifically authorised by national legislation.
The Municipal Systems Act 32 of 2000 (“the Municipal Systems Act”) section 74 says that if a municipality charges a tariff for a service, that tariff must be fair and,critically, the amount you pay must generally reflect how much of the service you actually use.
In plain terms: If you use more, you pay more. If you use less, you pay less. This is known as the proportionality principle.
The Municipal Property Rates Act 6 of 2004 (“the Rates Act”) sets out the rules for property rates specifically. If a municipality wants to levy a rate, it must calculate it as a specific Rand amount per Rand of your property's value, and it must follow strict procedures, including public participation and a publication of a formal rates by-law.
You cannot shortcut the process.
The Water Services Act 108 of 1977 adds another layer: water tariffs cannot deviate substantially from nationally prescribed norms and standards. There are rules about how water must be priced, and municipalities are not free to simply invent new structures.
The City also had its own Tariff Policy and Tariff by-law: rules the City itself agreed to follow when setting charges.
Arguments
What SAPOA and the other challengers argued
The challengers argued these charges were property rates dressed in tariff’s clothing. Because the charges are calculated from property value brackets, they are fundamentally linked to what a property is worth, not what services are used. That is the hallmark of a rate, not a tariff. And if they are rates, the City skipped the entire legal process required to impose them: no rates by-law, no proper public participation, no compliance with theRates Act.
Even if the court accepted them as service tariffs, the challengers argued they still failed the test in the Municipal Systems. A cleaning charge that does not depend on how much litter you generate, it cannot possibly be proportional to your use of the service. The challengers also pointed out that these charges attract Value Added Tax (“VAT”), whereas property rates are VAT-exempt. That means owners end up paying more for what is effectively a rate.
For sectional title schemes specifically, the CTCRA highlighted that the shift from a bulk collective fee to individual property-value-bracket fees caused charges to skyrocket for some units, particularly those in higher-value schemes.
What the City argued
The City maintained that because it used value brackets rather than a rate-in-the-Rand calculation, these are not property rates. The City argued that they have broad powers under the Municipal Systems Act to levy tariffs for service delivery, and that section 74 of the Municipal Systems Act, being the “proportionality principle” is not a hard rule: the word "generally" in the legislation gives it flexibility.
The City also argued there is a reasonable correlation between property value, household income, and utility usage, which justifies the bracket-based approach. In other words: wealthier properties, wealthier owners, higher usage, so the bracket is a reasonable proxy.
Case conclusion
First, the court confirmed that the label a municipality puts on a charge does not determine its legal nature. What matters is how the charge actually works. As these charges are tied to property value, they stray into the territory of property rates. But they are not proper rates either, because the City did not follow the Rates Act required process: no rates by-law, no proper public participation, no calculation as an amount in the Rand. They fall between two stools and comply with neither.
Second, even as a service tariff, they fail. The court rejected the City's reading of section 74(2) of the Municipal Systems Act and confirmed that the proportionality principle is a mandatory minimum requirement, not a guideline. A charge that has no connection to how much of a service you actually use cannot be a lawful tariff. The city-wide cleaning charge had an additional problem: the City's own Tariff Policy says cleaning charges must follow the "polluter pays" principle, meaning the more you pollute, the more you pay. A flat fee based on property value has nothing to do with pollution.
Third, the water and sewerage charges deviate from the City's own Water Services Development Plan and the nationally prescribed water tariff norms. The City, in short, broke their own rules.
The result: all three charges were declared unlawful and invalid. The court set them aside with effect from 30 June 2026, giving the City time to find a lawful alternative, but make no mistake, the judgment is a clear rejection of the approach.
What does this mean for your scheme?
If your body corporate has been paying these charges since July 2025 and recovering them from owners, it is important to understand what the order does and does not do. The charges imposed up to 30 June 2026 remain in force. The court's order does not unwind what has already been charged, and a refund programme is unlikely.
The City has also been given until 30 June 2026 to address any budget shortfalls that arise from the charges being declared invalid going forward. Whether the City will appeal is still an open question, however their representatives have indicated that once they have reviewed the judgment they intend to do so.
In the meantime, if you need help navigating what this judgment means for your scheme's budget and recovery processes, reach out to us at info@tvdmconsultants.com or call 061 536 3138.
About the Author:
Sarah Sydenham is a Community Schemes Consultant at TVDM Consultants.
Learn more about Sarah Sydenham here.