Appeals Judge Lets NYC Resume Pied-à-Terre Tax Rollout as Homeowner Lawsuit Continues

New York City can resume disputed parts of its new pied-à-terre tax rollout after a state appeals judge temporarily lifted restrictions that had stopped the city from acting on thousands of notices sent to homeowners.

Associate Justice Phillip Hom of the Appellate Division, Second Department, issued the stay Thursday, August 13, three days after Richmond County Supreme Court Justice Wayne Ozzi restricted parts of the city’s implementation of the surcharge. The appellate order allows the Department of Finance to continue the rollout while further court proceedings take place.

For now, the restrictions imposed by Ozzi are no longer in effect. The underlying dispute over whether the city followed state law when identifying properties potentially subject to the surcharge remains before the courts.

Ozzi’s August 10 order had barred the Finance Department from acting on notices sent to about 17,000 property owners without first making the residency determination required by state law. He also ordered the city to remove a supplemental property roll covering more than 900,000 residential properties and suspended deadlines tied to the disputed notices.

Rachel O’Brien, Carmine Morano and Simon Hedley sued New York City, Mayor Zohran Mamdani and finance officials on August 7 over how the new surcharge was implemented. Their challenge focuses on the process used to determine which properties could be subject to the tax.

The surcharge applies to certain high-value New York City properties that are not used as primary residences. During its first two years, the tax generally applies to one-, two-, and three-family homes valued at $5 million or more, as well as qualifying condominium and cooperative units valued at $1 million or more under the city’s valuation system.

At the center of the homeowners’ claims is Section 1352 of the New York Tax Law. The statute directs the Finance Department to make an initial determination about whether a qualifying property is not a primary residence based on information available to the agency. Property owners may then submit information challenging that determination and showing that the home qualifies for an exemption.

The homeowners argue that the city reversed that process by sending notices before making the individualized residency findings required by the statute. Their lawsuit was brought under Article 78, a New York procedure that allows courts to review actions taken by government agencies and determine whether officials followed duties imposed by law or acted within the authority given to them.

The latest appellate dispute developed after the city challenged Ozzi’s temporary order. City attorneys argued that filing the appeal suspended the restrictions, while lawyers for the homeowners maintained that portions of the order remained in force. Hom’s August 13 ruling resolved that immediate dispute by staying Ozzi’s order and allowing implementation to continue while the appeal proceeds.

City attorneys argued that leaving the restrictions in place could interfere with deadlines for administering the new surcharge, including preparations for property tax bills scheduled to be issued later this year. The Finance Department maintains that receiving one of its letters means only that a property may be subject to the surcharge and that homeowners can submit information showing that the property is their primary residence.

The agency also says inclusion on the broader supplemental property roll does not mean a homeowner owes the tax. According to the Finance Department, only about 17,000 property owners received letters identifying their properties as potentially subject to the surcharge, while the supplemental roll contains a much larger group of residential properties used as part of the city’s assessment process.

Attorneys for O’Brien, Morano and Hedley continue to argue that the state law placed the initial responsibility for determining residency on the Finance Department. Their challenge asks the court to require the city to follow that sequence before treating homeowners as potentially subject to the surcharge.

The homeowners are scheduled to return before Ozzi on August 31 as their challenge to the Finance Department’s implementation of the surcharge continues.