By Auren Freitas dos Santos
A recent judgment of the Supreme Court of Appeal (SCA) has brought clarity to a long-standing and increasingly common dispute between residential estates and the City of Johannesburg Metropolitan Municipality: when may the City of Johannesburg lawfully charge a business electricity tariff in a residential development?
The short answer is this:
Where an estate has mixed domestic and non-domestic electricity loads that cannot be separated, a business tariff lawfully applies — even if the estate is predominantly residential.
Background to the dispute
The case concerned two sectional title residential estates in Greenstone Hill, Johannesburg. Both estates are zoned Residential 3 and comprise hundreds of residential units.
Each estate, however, also includes a lifestyle centre containing a restaurant and a gym, neither of which was separately metered from the residential electricity supply.
The City of Johannesburg (through City Power) classified the electricity supply as a business tariff, on the basis that:
- the restaurant and gym constitute non-domestic (commercial) use, and
- the communal electricity load for domestic and non-domestic use could not be separated.
The bodies corporate disagreed and approached the High Court arguing that the estates were predominantly residential, and that the lifestyle centres were ancillary, meaning electricity should be billed at a domestic tariff. They lost in both the High Court and the Full Court before appealing to the SCA.
The legal framework
The dispute turned on the interpretation of section 5(10) of the Standardisation of Electricity By-Law 1999, which provides:
“Communal loads for both domestic and non-domestic uses which cannot be separated shall be metered at the appropriate non-domestic charge as determined by the Council from time to time.”
The City’s tariff policy similarly defines “business tariffs” to include:
- restaurants,
- gyms,
- recreational clubs, and
- mixed domestic and non-domestic loads.
Importantly, the bodies corporate did not challenge the validity of the by-laws or the tariff policy — only their application.
What the SCA decided
The SCA dismissed the appeal and confirmed the municipality’s approach. In doing so, it made several important findings:
- Restaurants and gyms are commercial, not domestic
A restaurant that sells food for profit is a business. A gym is not used for residential habitation. Both are non-domestic uses, even if access is limited to residents. - “Ancillary” use does not change the tariff outcome
The Court rejected the argument that a small or secondary commercial component can be ignored if the estate is “predominantly residential”. The by-laws do not introduce any threshold or dominance test. - Mixed load means mixed load
If electricity is supplied to both domestic and non-domestic uses through a single meter, it is a mixed domestic and non-domestic load — full stop. - Municipal zoning is irrelevant
Zoning as Residential 3 has no bearing on tariff classification. Tariffs are determined by use, not zoning. - Separate metering is the solution
The Court made it clear: If estates want domestic tariffs for residential units, they must install split meters so that non-domestic loads can be billed separately. - No discretion once the policy applies
Where the facts trigger section 5(10), the municipality is obliged to apply a non-domestic (business) tariff.
Why this judgment matters
This decision has wide-ranging consequences for all mixed use community schemes situated within the metropolitan area of the City of Johannesburg (that are not supplied by Eskom)
Many schemes have assumed that:
- being “mostly residential” is enough, or
- commercial facilities on common property which are restricted to residents remain “domestic”.
The SCA has now made it clear that this assumption is legally incorrect.
Key take-aways for trustees and managing agents
- If your scheme has any commercial facility (restaurant, gym, café, clubhouse with trading activity), check whether it is separately metered.
- If not, expect a business electricity tariff to apply lawfully.
- Zoning and “ancillary use” arguments will not succeed.
- The cost of split metering may be high — but the alternative is ongoing exposure to higher tariffs.
Does this judgment apply nationwide?
This judgment applies directly only to community schemes within the metropolitan area of the City of Johannesburg, as it interprets the City’s Standardisation of Electricity By-Law.
In terms of section 160(2) of the Constitution, read with section 11 of the Local Government Municipality Systems Act 32 of 2000, municipal councils are responsible for imposing rates and tariffs, including electricity tariffs. Each municipality therefore adopts its own by-laws and tariff policies.
That said, this judgment may well embolden other municipalities to adopt or apply similar principles when dealing with mixed-use schemes. Community schemes across South Africa should therefore stay informed, as changes in tariffs or policy interpretations could occur nationwide.
If you have any questions regarding this topic, feel free to contact us at info@theadvisory.co.za for a no-obligation quote.
Specialist Community Scheme Attorney (LLB, LLM), Auren Freitas dos Santos, is a Director of The Advisory, a boutique consultancy specialising exclusively in community schemes law. Reach out to him via email at info@theadvisory.co.za for a no-obligation quote to discuss this topic in more detail.
