NEW YORK — New York City can continue implementing its new pied-à-terre tax targeting certain high-value properties used as second homes, at least until a court hearing later this month, following a ruling Thursday by a state appellate court.
The decision represents a temporary victory for Mayor Zohran Mamdani’s administration after a Staten Island judge earlier this week ordered the city to temporarily halt parts of the tax rollout.
The dispute centers not on whether the city has the authority to impose the surcharge, but on how officials notified property owners and implemented the new system.
Homeowners Challenge City’s Rollout
The lawsuit was filed by a group of homeowners, including relatives of Republican City Council Member Frank Morano. They argue that the city’s notification process created confusion among thousands of property owners who received letters indicating they might be responsible for paying the surcharge.
Approximately 17,000 property owners reportedly received notices.
The plaintiffs contend that the city improperly placed the responsibility on homeowners to demonstrate that their properties qualify for an exemption. They are seeking additional time for affected owners to dispute their classification before being required to pay.
The lawsuit also objects to the city’s publication of information involving roughly 900,000 properties and their owners. City officials have maintained that the information is essentially part of a tax roll required under state law.
Attorney Randy Mastro, a former first deputy mayor under Eric Adams, is representing the homeowners.
Appeals Court Steps In
Earlier this week, Staten Island Supreme Court Justice Wayne Ozzi temporarily blocked the rollout while considering the homeowners’ arguments.
The city quickly appealed.
On Thursday, the Appellate Division’s Second Department issued an order allowing the process to continue while the legal dispute moves forward. The two sides are scheduled to return to Ozzi’s courtroom on August 31 for a hearing addressing whether implementation should continue while the lawsuit remains pending.
Mastro criticized the city’s decision to appeal and accused the administration of mishandling the program.
He argued that some homeowners receiving notices are clearly permanent New York City residents and said the city should have conducted additional research before determining which properties could potentially be subject to the surcharge.
Mastro said he remains confident that his clients will ultimately prevail in court.
Who Could Be Affected?
The pied-à-terre surcharge is aimed primarily at expensive New York City properties that do not qualify as an owner’s primary residence.
For one-, two- and three-family homes, the surcharge generally applies to properties assessed by the city at $5 million or more. Rates can range from approximately 0.8% to 1.3%.
Condominium and cooperative units valued at $1 million or more could face significantly higher surcharge rates, ranging from about 4% to 6.5%, depending on their value and classification.
Property owners who believe they received a tax notice incorrectly have until September 18 to notify the city and challenge their potential liability.
Lawsuit Could Delay — Not Eliminate — the Tax
One important distinction in the case is that the plaintiffs are not challenging the underlying legality of the pied-à-terre tax itself.
Instead, the lawsuit focuses on the city’s implementation and notification procedures.
That means even if the homeowners succeed, the legal action would be more likely to delay or modify the rollout than eliminate the tax altogether.
The Mamdani administration has maintained that its appeal permits the city to continue moving forward with implementation. The city reportedly expects the new surcharge to generate approximately $500 million in revenue.
For now, the tax rollout remains active, but the August 31 hearing could determine whether New York City will be permitted to continue implementing the program while the broader legal challenge proceeds.
