Oftentimes, the government will announce a public project which may affect the neighboring property’s value. Most of the time, the public project should increase the property’s value. Sometimes though, the announced public project may decrease the property’s value, which may make it difficult to rent the property. When that happens, the property owner may be able to sue for what is known as “Klopping damages”. This allows the owner to recover lost rental income due to the decrease in value from a public project.
Klopping v. City of Whittier: Paying Public Damages
The California Supreme Court case that set the rule for Klopping damages was Klopping v. City of Whittier (1972) 8 Cal.3d 39. In Klopping, the city of Whittier planned to form a parking district. (Id., at 42.) The plaintiffs, Klopping and Sarff, owned properties that were going to be condemned for the project.
Eventually, the condemnation suits against the plaintiffs’ properties were dismissed. (Id., at 42.) The plaintiffs submitted a claim to the city for damages based on the city’s original intention to condemn and then abandoning that condemnation but also announcing the city’s intention for future eminent domain action. (Id., at 43.) The trial court dismissed the plaintiffs’ case, and the plaintiffs appealed. (Id.)
The plaintiffs sought recovery under the legal theory of inverse condemnation. (Id.) This theory was based on ensuring that the government did not take or damage private property without first giving just compensation to the owner. (Id.) Generally, just compensation is considered the property’s market value at the time the government took the property. (Id.) The plaintiffs argued that because of the city’s condemnation announcements the fair market value of their properties declined, and the plaintiffs lost rental income as a result. (Id., at 45-46.)
The city argued that the plaintiffs were not entitled to these rental income losses because in the time between the public statements and the taking of the property, there was no physical invasion of the land or direct interference with possession of the land. (Id., at 46.) The city’s argument implied that the plaintiffs were seeking recovery under a “de facto” taking theory. (Id.) Under a “de facto” taking, there must first be a physical invasion or legal restraint, such as a harsh zoning regulation. (Id.)
The Court of Appeal ruled that the situation in this case was different from a de facto taking. (Id.) The plaintiffs were not contending that the actual taking was at an earlier date. (Id.) The plaintiffs were arguing that the properties should be valued while disregarding the effects of the city’s condemnation announcements. (Id., at 47.)
A previous California case held that testimony about the decrease in the property’s market value in between the government’s condemnation announcement and the government taking the property should not be allowed. (Id.) The Court of Appeal disagreed with this holding, and all subsequent holdings based on that case. (Id., at 49.)
The Court of Appeal concluded that if the party condemning the property acted improperly by excessively delaying the taking of the property, or other unreasonable conduct, then the owner should be compensated. (Id., at 51-52.) The Court of Appeal held that the plaintiffs should have the opportunity to show evidence of such improper conduct and evidence that the property decreased in value due to those actions. (Id.)
In Klopping, the plaintiffs alleged that the city’s actions were unreasonable, the city wanted to lower the value of the land, and the city intended to prevent the plaintiffs from using the land. (Id., at 54.) The Court of Appeal held that any unreasonable delay or action was a question of fact. (Id.)
The city argued that both plaintiffs were barred from recovering damages since they did not currently own the property. (Id., at 58.) For plaintiff Klopping specifically, the city claimed that, since Klopping’s land was taken in another condemnation lawsuit that went to final judgment, Klopping should have sought damages in that suit. (Id.) The Court of Appeal agreed with the city, holding that Klopping was barred from seeking damages. (Id.)
Plaintiff Sarl lost his property to foreclosure after filing his inverse condemnation lawsuit. (Id.) The Court of Appeal ruled that foreclosure did not prevent Sarl from seeking recovery for damages caused by the city’s condemnation announcements. (Id.) The Court of Appeal reversed and remanded the trial court’s judgment. (Id., at 59.)
Klopping gives property owners an avenue to claim damages when the government plans to condemn their property. Subsequent California law, however, clarifies some limitations on Klopping damages.
Klopping Damages in Subsequent Law
Multiple cases in California have upheld Klopping’s holding on recovering damages from condemnation announcements. Many of these cases outline limitations on Klopping damages and how courts should view the criteria for awarding Klopping damages.
Selby Realty Co. v. City of San Buenaventura (1973) 10 Cal.3d 110, demonstrated the limits of Klopping damages. In Selby, the city announced a general plan of extending certain streets. (Id., at 116.) The plaintiff sued the city seeking damages under inverse condemnation. (Id.) The Supreme Court of California held that this situation was distinct from Klopping, since in Selby the city only adopted a general plan while in Klopping the city announced an intention to condemn the property. (Id., at 120.) The Supreme Court of California also ruled there was no invasion of the plaintiff’s right to possess the property that injured him, and so the court dismissed his claim. (Id., at 119-121.)
In Jones v. City of Los Angeles (1979) 88 Cal.App.3d 965, the court found that the city’s conduct went above the general planning that happened in Selby. (Id., at 972.) The court, however, held that the city did nothing to block the plaintiff’s possession that directly affected the plaintiff’s injury, such as denying access to the property. (Id.) The court dismissed the plaintiff’s claims for Klopping damages. (Id., at 975.)
In City of Fresno v. Shewmake (1982) 129 Cal.App.3d 907, the city designated several properties it needed to purchase for an airport project. (Id., at 910.) The city began an eminent domain action to buy and seize the property two years later (Id.) The homeowners sued for Klopping damages, which the trial court awarded. (Id.) The Court of Appeal reversed, holding there was insufficient evidence that the homeowners suffered actual loss, since the homeowners did not attempt to rent the property before or after the announcement. (Id., at 912.)
As seen in later California case law, a plaintiff’s claim for Klopping damages does have certain limitations. The government must have a specific plan to condemn the property rather than a general plan. The government must actually be preventing the plaintiff from possessing the property, and the government’s actions must directly relate to the plaintiff’s injuries. Finally, the plaintiff must suffer an actual loss in rental income.
“Shawn” is a property owner living in Los Angeles renting out some apartments to his tenants. The city of Los Angeles decides to expand Los Angeles International Airport and announced its intention to condemn Shawn’s property as part of this expansion.
Due to the city’s announcement, Shawn’s property decreases in value. Several tenants leave, and Shawn has trouble finding new tenants to rent to. The city also denies Shawn access to the property. Angry, Shawn sues the city for Klopping damages based on inverse condemnation.
At trial, the court holds that the city’s plans were specific and above any general planning. Additionally, the city prevented Shawn from possessing the property, and Shawn suffered an actual loss in rental income. The trial court rules that Shawn is entitled to Klopping damages from the city.
How Can the Attorneys at Underwood Law Assist You?
Klopping damages are a way for property owners to recover from any lost rental income due to government action on their property. Although owners can recover damages, owners must be aware of the limitations for awarding Klopping damages. Courts must go through several criteria before finding that a plaintiff is entitled to Klopping damages.
As each case is unique, litigants would be well-served to seek experienced counsel familiar with the ins and outs of property taxes and the law surrounding them. At the Underwood Law Firm, our knowledgeable attorneys are here to help. If you are seeking to buyout your cotenants interest in your property, are worried about whether you are subject to a tax-reassessment, or if you just have questions, please do not hesitate to contact our office.