Judge Halts NYC’s Second-Home Surcharge Rollout

NEW YORK, NY— A Staten Island judge ordered New York City to pause its rollout of the new surcharge on high-value homes that are not primary residences on Monday, temporarily blocking the City from sending additional notices and requiring it to remove a nearly 960,000-property data set from its website.

Justice Wayne M. Ozzi said the City’s actions met the standard for irreparable harm.

“Sending out notices to 17,000 homeowners who might be subject to a surcharge doesn’t satisfy the intent of the legislation,” Ozzi said in court Monday.

“Notices should state what the records show. They are a treasure trove of information,” he said. “I can’t unring the bell, but I can stop any further notices going out.”

The order requires the City to remove its publicly available property roll.

For now, homeowners who received letters do not face the Sept. 18 deadline while the restraining order is in place, and the City cannot continue sending notices under the challenged rollout.

Mayor Zohran Mamdani’s administration said Monday that it would immediately appeal the ruling.

Three New York City homeowners filed a lawsuit against the City, asking a judge to halt the rollout of a new surcharge on high-value properties that do not serve as primary residences.

The homeowners — Rachel O’Brien, Carmine Morano and Simon Hedley — also filed an emergency proceeding in Richmond County Supreme Court on Aug. 7, wanting the City to remove a public property roll containing information on nearly 960,000 residential properties.

The lawsuit challenges the City’s implementation of a pied-à-terre tax, which applies to qualifying non-primary residences with market values of at least $5 million for one-, two- and three-family homes and $1 million for condominium and cooperative apartments.

Instead of challenging the state law authorizing the surcharge, the lawsuit focuses on how the City identifies properties subject to the charge.

Essentially, the lawsuit asks the judge: Who has to determine whether a property is a primary residence, the City or the homeowner?

The plaintiffs argue the City should bear the burden of who the tax applies to.

The City’s Department of Finance has mailed notices to approximately 17,000 property owners warning that their properties “may be subject” to the surcharge and telling them how to establish that the properties are primary residences.

Those notices came before the City made the individualized determination required by state law, the lawsuit reads.

A proposed emergency order filed with the lawsuit asks the judge to stop the City from enforcing the notices, including a deadline that the City extended from Aug. 21 to Sept. 18.

Matt Rauschenbach, a spokesperson for Mamdani, said the City recognizes its responsibility to make the process understandable when it introduces a new requirement.

“As the mayor has said, we also know that whenever government asks something new of New Yorkers, we have a responsibility to make the process clear, transparent and accessible.”

Rauschenbach said the Department of Finance has been working to respond to homeowners’ concerns.

“The Law Department is prepared to vigorously defend the city against this suit," he added.

What Did The City Put Online?

On July 24, the Department of Finance published what it called a “supplemental market value roll” connected to the surcharge.

According to Martha E. Stark, a former New York City finance commissioner who was hired by the plaintiffs as an expert, the roll contained approximately 959,710 property records.

Stark analyzed the City’s published data and found that only 24,218 properties, roughly 2.5 percent, met the surcharge’s value thresholds.

Her analysis broke down the numbers:

• Of 684,619 one-, two- and three-family homes: 6,802 met the $5 million threshold.
• Of 230,885 condominium units: 11,830 met the $1 million threshold.
• Of 36,677 published cooperative apartments: 5,586 met the $1 million threshold.

The remaining properties fell below the applicable value thresholds and therefore do not meet that requirement for the surcharge.

Stark said the roll also lacked a second requirement for the surcharge: whether the property serves as a primary residence.

“Liability turns on these two criteria — non-primary-residence status and value at or above the relevant threshold,” Stark wrote.

The plaintiffs argue that publishing the broader roll confused homeowners because the City described it as related to the surcharge even though the overwhelming majority of listed properties do not meet the value threshold.

The City later stated that the vast majority of properties on the roll would not be subject to the surcharge, according to the lawsuit.

One of the plaintiffs who lives in Staten Island called the rollout rushed and "politically convenient."

“It is absolutely absurd that the City publicly identified our home as a possible second residence when my husband and I live here, raise our family here, and have made it our permanent home,” O’Brien wrote in a news release.

Why Did 17,000 Homeowners Get Letters?

The Department of Finance sent approximately 17,000 letters to property owners whose homes “may” be subject to the surcharge, according to Stark’s affirmation and the lawsuit.

That number represents roughly 70 percent of the 24,218 properties Stark identified as meeting the value threshold.

The lawsuit argues that the City should have first determined which of those properties were not primary residences before asking owners to respond.

The plaintiffs point to the language of the state law, which they argue requires the Department of Finance to make an “initial determination” that a qualifying property “is not a primary residence” using information available to the department.

Only after that determination, they argue, can the City notify the owner and give the owner an opportunity to challenge it.

Instead, the City sent letters telling homeowners to establish that their properties qualify for an “exemption.”

“The State’s authorizing statute never refers to any such ‘exemption’ or process for applying to ‘exempt’ a property,” the petition read.

The City’s notices, according to the lawsuit, read:

“Our records indicate that the property referenced above may be subject to the new surcharge.”

The notices then ask recipients to respond and provide documents supporting their claim that the property serves as a primary residence.

What Happens If Your Home Is On The List?

For homeowners who received letters, the dispute has a practical consequence: They may have to spend time gathering documents to establish that the property where they live is their primary residence.

One plaintiff, Simon Hedley, has lived at his Manhattan home for more than 15 years, uses the address on his tax returns and other official documents, and pays New York City income taxes, according to the lawsuit.

The petition states he still received a letter warning that the property “may be subject” to the surcharge.

“The Department was not without principled means to identify the properties actually subject to the Surcharge,” Stark wrote.

She cited the City’s records involving the senior, veteran and STAR exemptions, the cooperative and condominium tax abatement program and state income tax information.

The City’s own rules, Stark wrote, note the Department can consider whether an owner listed the property as a permanent home address on a federal or state income tax return.

How Many Properties Could Actually Owe The Surcharge?

Stark estimates that approximately 5,000 to 6,000 properties may ultimately be subject to the surcharge.

She estimates associated liability at approximately $450 million.

But Stark cautions that her estimate is not a count of actual liable properties.

Her estimate starts with the approximately 24,000 properties that meet the value thresholds and applies assumptions about how many owners would establish that their properties serve as primary residences.

The plaintiffs use the estimate to argue that the City’s 17,000 notices reached far more homeowners than the number likely to owe the surcharge.

A Staten Island judge is expected to hear oral arguments Monday at 2:15 p.m. on the requested temporary restraining order.