The executive committee of eThekwini municipality has recommended that the council write off penalties and collection charges on residential properties in the Ingonyama Trust areas amounting to R127million.
The decision was taken at a special Exco meeting on Friday.
Mayor Obed Mlaba said the municipality and the trust have been in negotiations for years about the liability for the rates.
In 1998 the municipality sent court orders enforcing the payment of rates by all individual ratepayers in the areas.
The areas were not liable for rates prior to 1998.
"The municipality then experienced problems with incorrect addresses and accounts did not reach ratepayers," Mlaba said.
"This resulted in the accumulation of debt because of penalties and collection charges. The Exco agreed that the penalties and collection charges be deemed irrecoverable."
Communities in the affected areas will be asked to come forward and make payment arrangements for the rates.
"It is important that the people in the Ingonyama Trust areas sit down with the municipality to air their problems and chart a way forward," he said.