Eminent Domain Report

Appropriately, on Tax Day 2026, the Court of Appeal issued its ruling in The Retail Property Trust v. Orange County Assessment Appeals Board No. 1 addressing available property tax assessment relief under Revenue and Taxation (RTC) Code section 170 for access restrictions from orders issued during to the COVID-19 pandemic.

The shopping center at issue claimed that the restricted access to the shopping center during the COVID pandemic caused “damage” entitling the shopping center to property tax relief under RTC section 170.  RTC 170 provides a mechanism whereby property may be reassessed in the event of a qualifying misfortune or calamity. Damage under the statute includes “a diminution in the value of property as a result of restricted access to the property….” The Taxpayer seized upon the restricted access language to argue that the orders issued during the COVID-19 pandemic constituted a qualifying event for a reduced assessment of its property. 

The appellate court agreed with the Assessor and trial court that the damage contemplated under RTC 170 for relief must include “physical damage,” and did not include damage resulting from the restricted access caused by the pandemic. As an example of restricted access that may support a claim for relief, the court cited physical destruction of a bridge required to access a property and noted that the Legislature could not “‘redefine ‘damage’ to eliminate all need for physical damage.’” 

The court’s analysis confirmed that statutes inconsistent with the Constitution are void and cited Article XIII, section 15 of the Constitution as empowering local taxing entities to assess or reassess property physically damaged or destroyed. The Court further noted that RTC 170 was adopted to implement this provision of the Constitution. In furtherance of its analysis, the Court cited to Slocum v. State Bd. of Equalization (2005) 134 Cal. App. 4^th 969, as an instance whereby the Court struck down a rule as unconstitutional that failed to account for the Constitutional requirement for physical damage.

The court distinguished damage occasioned by a virus, relying on a 2021 insurance case that found, specific to COVID-19, that “the virus harms human beings, not property.” Citing Wellness Eatery La Jolla v. Hanover Insurance Group (S.D. Cal. 2021) 517 F. Supp. 3d 1096, 1106.

While the Court did not strike down RTC 170, it made it clear that the damage contemplated under RTC 170 must align with the Constitutional requirement for “physical” damage. Based on its analysis, the taxpayer was denied relief.