New York City must redo its rollout of the controversial pied-à-terre tax after a Staten Island judge ruled Tuesday that the Mamdani administration mishandled the program’s launch. Issued by Judge Wayne M. Ozzi, the ruling sides with homeowners who sued the city over what they described as “mass confusion” surrounding the surcharge. Many New Yorkers who were ineligible for the tax received notices saying they may be subject to it, while the city also released a roll listing more than 900,000 properties that some mistakenly believed were all subject to the tax. The administration has already appealed the ruling, temporarily blocking an order that would force the city to restart its notification process.
According to the ruling, homeowners were “substantially harmed” and “penalized needlessly” by the Department of Finance’s (DOF) rollout of the surcharge, as reported by the New York Times.
Championed by the mayor as a way to fulfill his pledge to “tax the rich,” the surcharge applies to secondary one- to three-family homes valued at more than $5 million, as well as secondary condos and co-ops valued at $1 million or more.
Filed by a coalition of homeowners early last month, the lawsuit challenged the rollout of the program, not the legality of the surcharge itself. The tax therefore remains in place, but the administration may have to restart the notification process.
The legal challenge stemmed from reports that some people with only one primary NYC residence received notifications saying they may be subject to the tax, including both ordinary homeowners and elected officials.
The confusion was compounded when the DOF published its twice-yearly report listing the names and addresses associated with nearly one million properties, as required under the new law.
Despite later clarifying that the release fulfilled a state law requirement and covered most non-rental residential properties in the city, not just those likely to be subject to the surcharge, Mamdani later extended the deadline for submitting documentation twice.
Ozzi’s ruling requires the city to take down the list and replace it with a “more limited version” containing only properties subject to the tax. The administration must also cancel previously mailed notices, narrow the list of recipients, and send new notices explaining how the city determined that each property was subject to the surcharge, according to the Times.
The ruling came shortly after Stephen Wynn, founder of Wynn Resorts, and Wilbur Ross, a former U.S. commerce secretary, filed their own lawsuit challenging the tax, according to Gothamist. Wynn, Ross, and Ross’ wife allege that the tax discriminates against wealthy out-of-towners through a property tax surcharge that “falls exclusively on nonresidents of NYC.”
James Whelan, president of the Real Estate Board of New York, celebrated the ruling and called the city’s rollout of the surcharge “deeply flawed.”
“From the beginning, we warned that this tax was rushed forward without adequate consideration of its legal, practical, and economic consequences. Today’s decision confirms that the city’s rollout was deeply flawed and failed to provide basic procedural protections for homeowners,” Whelan said.
“This is an important victory for the thousands of New Yorkers who were wrongly swept into an arbitrary and confusing process. While the court’s ruling focuses on the implementation of the tax, it reinforces broader concerns about the legality and fairness of the tax itself.”
Whelan also noted that the lawsuit targeted only the rollout of the tax, suggesting that challenges to the legality of the program itself could follow.
In response to the ruling, City Hall said it would not back down, vowing to appeal the decision and seek a stay of the judge’s order requiring the city to issue new notices.
“Today’s decision is wrong,” City Hall spokesperson Matt Rauschenbach said in a statement, as reported by Politico. “With a stay, we will continue implementing the surcharge fairly, efficiently, and in full compliance with the law, as we have since day one.”
“If you can afford a luxury second home in NYC, you can afford to pay your fair share for the schools, streets and parks that make this city work,” he added. “The ultra-wealthy are fighting in court to avoid paying their fair share. They have filed lawsuit after lawsuit to protect their privilege, and we will not back down.”
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