Thursday, April 16, 2026
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Neither COVID-19 Nor California’s Response Amounts to ‘Physical’ Harm to Property—C.A.
Opinion Says Mall Owner Rightly Denied Tax Reassessment Based on Collapsing Valuation Following Pandemic Because California Law Requires That Calamity Cause ‘Damage’
By a MetNews Staff Writer
Div. Three of the Fourth District Court of Appeal held yesterday that the owner of an Orange County mall was properly denied reassessment of its property taxes due to sharp declines in valuation of the real estate following the COVID-19 pandemic under a California law providing for such relief in the event of a “major misfortune or calamity” that causes “damage or destruction.”
At issue is Revenue and Taxation Code §170(a)(1), which provides that “the board of supervisors, by ordinance, may provide that every assessee…whose property was damaged or destroyed without the assessee’s…fault, may apply for reassessment” if the harm was caused by “[a] major misfortune or calamity, in an area…subsequently proclaimed by the Governor to be in a state of disaster.” Orange County has adopted such an ordinance.
Sec. 170(a)(1) further specifies:
“As used in this paragraph, ‘damage’ includes a diminution in…value…as a result of restricted access to the property where that restricted access was caused by the major misfortune or calamity.”
Justice Martha K. Gooding, writing for the court, rejected the plaintiff’s assertion that its property was “damaged” when the value collapsed due to substantial restrictions on access caused by the COVID-19 virus and the related emergency orders signed by Governor Gavin Newsom in 2020-21. She declared:
“Neither governmental orders restricting access to property due to the COVID-19 virus nor the virus itself equate to physical harm to property—either direct or indirect—and plaintiff failed to establish eligibility for reassessment under section 170(a)(1).”
Acting Presiding Justice Joanne Motoike and Justice Thomas A. Delaney joined in the opinion.
Seeking Reassessment
Seeking the reassessment was The Retail Property Trust, which owns a 40-acre site in Brea that includes an enclosed shopping mall. The facility was closed for more than 100 days beginning in March 2020 due to emergency orders relating to the COVID-19 pandemic, and faced significant restrictions on access, operations, occupancy, and use after it was allowed to reopen.
On March 1, 2021, the trust filed an application with the county for reassessment pursuant to §170(a)(1), arguing that the pandemic and the state’s response had diminished the value of the property. The request was denied a few weeks later because there was “[n]o physical damage” to the property.
After the Orange County Assessment Appeals Board No. 1 upheld the denial, the trust sought relief in the superior court in March 2023. The operative pleading was styled as a petition for writ of mandate challenging the agency’s decision and a complaint asserting a claim for the refund of property taxes against the county.
Then-Orange Superior Court Judge Nathan Scott (now a Div. Three justice) denied the plaintiff’s requests following a September 2024 bench trial.
Scott ruled that, although §170(a)(1) authorizes relief due to “indirect physical damage that causes restricted access to property—e.g., physical damage to an off-property bridge…that restricts access to undamaged property,” the record “does not allow the court to conclude that…the spread of a virus…is the kind of…damage…that warrants reassessment.”
Judgment was entered on Nov. 5, 2024.
Mandated Closures
Framing the appeal as addressing “[t]he fundamental issue [of] whether a property owner is eligible for reassessment under section 170(a)(1) as a result of mandated closures of (and restricted access to) its property arising from governmental orders issued in response to the pandemic or from the existence of the COVID-19 virus itself,” Gooding noted:
“Article XIII, section 15 of the California Constitution empowers the Legislature to authorize local taxing entities to provide for the assessment or reassessment of taxable property physically damaged or destroyed after the lien date to which the assessment or reassessment relates.’ ”
She pointed out that Sec. 170 was adopted in 1974 to implement section 15, which was added that year to the Constitution by way of the initiative process, and cited the 2005 decision in Slocum v. State Board of Equalization, in which by Div. Four of the First District Court of Appeal held that reassessment is limited to scenarios where the taxable property has been physically “damaged or destroyed.”
Restricted Access
Arguing that the opinion does not foreclose the requested relief, the plaintiff argued that “Section 170(a)(1)’s ‘restricted access’ provision may apply to property when the ‘major misfortune or calamity’ has manifested physically within the area of the property—or at least within the state—thereby restricting access to the property.”
Rejecting this “manifestation” interpretation, Gooding remarked:
“Plaintiff contends that ‘[a]ny requirement limiting Section 170(a)(1) relief to scenarios where a taxpayer can show that some property other than their own has suffered direct physical damage would create an arbitrary and nonsensical requirement with no reasonable basis.’ Not so. It is not difficult to envision a scenario where a property owner’s property diminishes in value because another property that is not owned by the property owner was physically damaged from a qualifying major misfortune or calamity, which in turn resulted in restricted access to the property owner’s property, even though the property owner’s property was not itself physically harmed by the calamity.”
She added:
“Plaintiff’s proposed interpretation of section 170(a)(1) would be directly contrary to both the constitutional mandate of physical damage and the directive to construe statutes, where possible, in a manner that renders them valid.”
The case is The Retail Property Trust v. Orange County Assessment (County of Orange), 2026 S.O.S. 1025.
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