The Occupation of Treviso isn’t What We Think

The city states still have surrounding land that comes under their jurisdiction, so the Circle doesn't actually have to be within the city.

The codex about the history of the southern circles contradicts this idea as it suggested mages were still part of society but only allowed to perform very limited magic in the early days of the Chantry:
It surprised absolutely no one when the mages of Val Royeaux, in protest, snuffed the sacred flames of the cathedral and barricaded themselves inside the choir loft. No one, that is, but Divine Ambrosia II, who was outraged and attempted to order an Exalted March upon her own cathedral. Even her most devout Templars discouraged that idea. For 21 days, the fires remained unlit while negotiations were conducted, legend tells us, by shouting back and forth from the loft.

The mages went cheerily into exile in a remote fortress outside of the capital, where they would be kept under the watchful eye of the Templars and a council of their own elder magi. Outside of normal society, and outside of the Chantry, the mages would form their own closed society, the Circle, separated for the first time in human history.

Now this history does seem to be contradicted somewhat by the later history given for the formation of the Circles under the newly incorporated Inquisition, first outlined in Asunder and then confirmed in later lore books. In that the Circles were created after the Nevarran Accord, which brought the Seekers of Truth into the Chantry fold and they formed the Templar Order to oversee them. Since the Divine in the codex was Ambrosia II, I think it must refer to some later development, as there had to have been an Ambrosia I and I believe the Nevarran Accord was signed when Divine Justinia I was still divine, although I could be wrong about that.

Nevarra is an oddity because of the Mortalitasi, whose foundation came more than a century after the formation of the Templar Order and the Circles, so I've always wondered how they allowed this. Nevarra was only a city state at this time, with a lot less power than it acquired later, so it is peculiar that a Tevinter mage was able to set up this custom, so at variance with Chantry burial practices and clearly involving contact with spirits. Personally, I think she was reviving a much older tradition from the time of the Old Gods but that still doesn't explain how the Chantry/Templars allowed it. Anyway, the main city associated with the old Chantry loyalist Circle of Magi is Cumberland, which may have been part of Orlais at one time before it became incorporated into Nevarra. The explanation for the Circle being located there is that one of the mages was the daughter of a leading figure in that city, who wanted her to continue to live in the manner to which she was accustomed, so she gifted the Sun Dome palace to the Chantry. I suppose a similar story might account for other Circles being located in cities rather than outside them.