A New York state judge has thrown a wrench into New York City's enforcement of its new pied-à-terre tax, ordering the administration of Mayor Zohran Mamdani to scrap roughly 17,000 warning notices sent last summer and rebuild its list of affected properties before billing any owners. The ruling, issued Tuesday by Justice Wayne M. Ozzi of the state Supreme Court in Richmond County, leaves the tax itself intact but strikes down the process the Department of Finance used to identify which luxury second homes owe the surcharge.
The decision lands just days before an Oct. 6 deadline for owners to file for exemptions, and City Hall has already signaled it will seek a stay and appeal. For financial advisors with clients holding high-value condos, co-ops, or townhouses in the five boroughs, the legal wrangling adds another layer of uncertainty to an already contentious levy.
Why the judge ruled against the rollout
Homeowners Simon Hedley, Rachel O'Brien, and Carmine Morano, who brought the case, argued that the city wrongly flagged their primary residences as potential second homes. They did not challenge the tax's constitutionality but contended that the city shifted the burden of proving residency onto owners rather than doing its own due diligence. Justice Ozzi agreed, ruling that the Department of Finance cannot place owners on a list and then require them to demonstrate exemption. Before sending a notice, the agency must make an individualized initial determination using all available resources and information, and it must provide the records behind its conclusion that a property is a second home, giving the owner a chance to contest it.
The judge also ordered the city to remove a supplemental tax roll posted online in July, which listed the names and addresses of more than 900,000 homeowners, regardless of whether they were subject to the surcharge. The city may replace it with a roll limited to properties that actually owe the tax. Randy Mastro, a former deputy mayor representing the homeowners, hailed the ruling as a victory. "We're gratified that the court has recognized we were right all along," Mastro said in a statement. "The fact is that this administration failed to follow state law when it burdened New York City homeowners with proving they live in their own homes or be on the hook for paying a new surcharge."
Who the surcharge targets
The pied-à-terre tax was passed as part of the state's fiscal 2027 budget at Mamdani's request, following Governor Kathy Hochul's initial proposal for an annual surcharge on luxury second homes. The surcharge applies to properties that are not the owner's primary residence, covering one-, two-, and three-family homes valued above $5 million and condos and co-ops valued at $1 million or more within the city. The city projects at least $500 million in annual revenue from the levy, making it a centerpiece of Mamdani's plan to raise taxes on the wealthy.
The tax has drawn high-profile resistance, including from hedge fund giant Citadel after CEO Ken Griffin's penthouse was featured in a promotional video. Individual bills can be steep: a separate lawsuit filed Monday by casino developer Steve Wynn and former Commerce Secretary Wilbur Ross, both Florida residents, claims Ross could owe more than $83,000 for his Manhattan co-op and Wynn more than $183,000 for his city residence.
What happens next
City Hall remains defiant. "The ultra-wealthy are fighting in court to avoid paying their fair share," said Matt Rauschenbach, a spokesperson for the mayor, in a statement. "Today's decision is wrong, and we will invoke a stay of the injunction." If a stay is granted, the city could continue administering the surcharge while its appeal proceeds. Otherwise, the Department of Finance must redo its determinations under the new rules.
The broader constitutional fight is just beginning. Wynn and Ross have sued the state in a Long Island court, arguing the tax unlawfully discriminates against non-primary residents. On Tuesday, a group of Suffolk County homeowners and a co-op filed their own suit, claiming the law discriminates against nonresidents, applies retroactively, and imposes unconstitutional burdens. Governor Hochul's office dismissed these challenges, with a spokesperson saying, "When Steve Wynn and Wilbur Ross try to cast themselves as sympathetic figures in a fight over paying their fair share on multimillion-dollar second homes, they're making the case for the pied-à-terre tax as well as anyone could."
For advisors, the immediate takeaway is to monitor the stay request and appeal, as the timeline for any actual bills remains unclear. The city's initial misfire—sending notices to thousands of primary residences—has already sparked appeals, as reported earlier. Meanwhile, the possibility of federal intervention looms, with reports that the Trump administration is weighing a block on the tax, as detailed here.
