NYC Must Scrap 17,000 Pied-à-Terre Tax Notices in Court-Ordered Do-Over

New York City must scrap roughly 17,000 notices sent to homeowners under its new pied-à-terre tax after a judge ruled officials improperly made New Yorkers prove they didn’t owe the surcharge before determining who actually did.

“All previously Mailed Notices are to be cancelled,” Richmond County Supreme Court Justice Wayne M. Ozzi ordered on Tuesday. He ruled that the notices were “arbitrary and capricious, affected by errors of law, and in violation of the recipients’ due process rights.”

The ruling does not strike down the new surcharge on high-value homes that are not primary residences. But it forces the city to redo the process it used to determine who should pay it.

Randy Mastro, an attorney representing the homeowners who challenged the rollout, called the decision a required “do-over.”

“It confirms what we’ve been saying all along, which is that the Mamdani administration massively screwed up the rollout of this pied-à-terre tax,” Mastro said following the ruling. “Now, the city will have to do it over and do it right.”

The mayor's office did not immediately respond to a request for comment on Tuesday evening.

The 17,000 ‘nastygrams’ have to go

Beginning in July, the Department of Finance sent notices to roughly 17,000 property owners saying their homes “may be subject” to the surcharge and directing them to apply for an exemption if the property was actually their primary residence.

Ozzi found the city had the process backward, writing that its refusal to use tax data that was “sufficiently available” shifted the burden onto homeowners to establish their residency.

Mastro argued the city could have obtained that information before sending the notices.

“The state statute authorizing implementation of the statute required state authorities to cooperate with the city upon request to get the information of who paid city income taxes,” Mastro said. “The city could have done all of that in advance.”

Instead, he said, the city sent what he called “17,000 ... nastygrams” to homeowners—including Mastro himself, who said he has lived in the city and paid city income taxes for 40 years.

“Literally within days, they are letting thousands of them know they don’t owe the surcharge,” Mastro said after the city began consulting additional tax information. “That’s a massive screwup.”

The Department of Finance must now make an “individualized initial determination” using the most recent available tax information and other records before sending a new notice. The court also ordered the agency to remove its existing supplemental roll of more than 900,000 properties and replace it with a narrower roll of properties actually subject to the surcharge.

The tax itself now faces a separate legal challenge

Tuesday’s ruling leaves the pied-à-terre surcharge itself intact.

“This case is about the botched rollout,” Mastro clarified. “It’s not about the legality or constitutionality of the tax.”

But two separate lawsuits are more directly challenging the tax.

On Monday, casino executive Steve Wynn and former U.S. Commerce Secretary Wilbur Ross sued New York state, the Wall Street Journal reports. Their case argues that the surcharge violates state and federal constitutional protections, including by discriminating against people who live outside New York City.

Mastro said that he had filed a separate constitutional challenge on behalf of another group of property owners on Tuesday. Asked why his clients had not joined the Wynn and Ross case, he drew a distinction between the two groups.

“My clients are individuals or entities, not billionaires, who have been uniquely and unfairly affected by this tax,” Mastro said.

His clients include owners who sold or bought properties earlier this year, a co-op board, and longtime New Yorkers who Mastro says face substantially higher tax bills under the surcharge.

“The fact of the matter is that they are very different lawsuits—different plaintiffs, different defendants, different substance,” Mastro said, contrasting his new constitutional challenge with the rollout case decided on Tuesday.