A Staten Island judge has ordered New York City to cancel roughly 17,000 pied-à-terre tax notices and make property-by-property determinations first. The ruling does not address whether the tax itself is legal, and the city plans to seek a stay.
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| Mayor Zohran Mamdani's administration said it will seek a stay of a judge's ruling ordering the city to restart its pied-à-terre tax rollout. |
A New York judge on Tuesday threw out the way New York City rolled out its new tax on high-end second homes, ordering Mayor Zohran Mamdani's administration to cancel the notices it mailed to owners and begin again.
State Supreme Court Justice Wayne M. Ozzi ruled that the city's Department of Finance must make an individual initial determination for each property before telling an owner the surcharge may apply. In doing so, he wrote, the department must draw on "any and all resources and information" available to it. He also wrote that homeowners were being "substantially harmed and penalized needlessly" by the department's approach.
The judge did not rule on whether the tax is lawful. The case concerned only how the city put it into effect.
What the tax covers
The surcharge took effect July 1. It applies to one-, two- and three-family homes worth more than $5 million, and to condos and co-ops worth more than $1 million, when the property is not the owner's primary residence. Gov. Kathy Hochul unveiled the idea in the spring, and Mamdani supported it as part of his pledge to raise taxes on wealthy New Yorkers. The city had counted on at least $500 million a year from it to help close a budget gap.
Problems with the rollout
In July, about 17,000 owners received notices saying their property might be subject to the surcharge. The notices required them to file for an exemption or face the tax. The city has acknowledged it did not check owners' income tax filings before mailing them, and once it did, thousands of the flagged properties turned out to be primary residences.
The Department of Finance also posted an online roll listing the names and addresses of more than 900,000 New York City homeowners, including many who would never owe the tax. Ozzi ordered that roll taken down. The city may replace it with a second roll that lists only properties actually subject to the surcharge.
Any new notices may be sent only after the city completes those individualized determinations, the judge said. The ruling came one week before the October 6 exemption deadline.
The lawsuit
Randy Mastro, a former first deputy mayor under Mayor Eric Adams, filed the suit for three homeowners who said the city wrongly flagged their primary residences. Mastro has sued the Mamdani administration several times since leaving City Hall. He said in August that he had received a notice himself despite having lived in Manhattan for decades.
The suit made three main claims:
- State law required an individual determination for each property before a notice went out, and the city skipped that step.
- The city put the burden on homeowners to prove they did not owe the tax, instead of doing that work itself.
- Nothing in the law allowed the city to publish an online database of more than 900,000 properties with owners' names and addresses.
Mastro said the court "recognized we were right all along." He said the city must now decide who truly owes the surcharge before it demands payment.
City and state response
Mamdani spokesperson Matt Rauschenbach called the decision "wrong." He said the surcharge rests on a basic principle of fairness: people who can afford a luxury second home in the city can afford to pay their fair share for schools, streets and parks. He said the administration would seek a stay of the injunction and keep implementing the surcharge.
The city was expected to file an appeal Tuesday evening, which would trigger an automatic stay, according to a source familiar with its plans cited by Fortune. A city official told CNN the same. A stay would pause the ruling while the appeal goes forward.
Jen Goodman, Hochul's director of rapid response, said the lawsuit over how the tax is administered is a matter for the city and the courts. She added that the governor still believes people who can afford a multimillion-dollar second home in the city can afford to pay their fair share.
Other challenges to the tax
Separate lawsuits go after the tax itself. On Monday, former Commerce Secretary Wilbur Ross, his wife, Hilary Geary Ross, and casino developer Steve Wynn sued the state. They argue the tax is unconstitutional because it falls only on people who do not live in New York City. Ross is not part of the Staten Island case. He said the ruling did not surprise him but noted an appeal was likely, so the matter was not necessarily over.
On Tuesday, a group of Suffolk County homeowners and a co-op also sued the state. They argue the law discriminates against nonresidents, applies retroactively and places unconstitutional burdens on homeowners and cooperative buildings. Their suit also raises concerns about the roll and the mailed notices, saying the process caused confusion and privacy concerns and shifted the burden onto owners to prove they qualified for an exemption.
The city's appeal will decide whether the notices stay canceled while the case continues. Meanwhile, the constitutional challenges to the tax remain pending.