A Staten Island judge on Tuesday ordered New York City to cancel notices for the pied-à-terre tax sent to about 17,000 property owners and to restart the rollout of its tax on high-value second homes, as two new lawsuits challenging its constitutionality were filed this week.
State Supreme Court Justice Wayne Ozzi sided with a group of homeowners who argued the Department of Finance did not determine who owed the non-primary residence surcharge, known as the pied-à-terre tax, before moving to collect it, according to The New York Times. The lawsuit challenged the city’s rollout and did not contest the legality of the tax.
“Now the administration must go back and do what it should have done from the start: Use all the information at its disposal to make an individualized ‘initial determination’ about who truly owes this surcharge before demanding that they pay it,” Randy Mastro, the homeowners’ lawyer and a former New York City first deputy mayor, said in a statement.
The order requires the city to take down its online list of nearly 1 million properties that could be subject to the charge — which included owners’ names — and replace it with a list of only the properties that owe the tax. The city must also cancel the notices it mailed, narrow the list of recipients and send new notices explaining how it determined each property is subject to the surcharge.
The city is expected to seek a stay of the decision, the Times reported. Ozzi issued a temporary restraining order in the case in August, and the city’s appeal put that order on hold.
Mastro said during a virtual news conference Tuesday that he would ask the appellate court to deny any stay.
“The city had every opportunity to present its case,” he said. “Even if there were technically an automatic stay, it should be vacated while the case is on appeal.”
Mastro said the city has told the court it will not invoice the tax until Nov. 15 or collect it until Jan. 1, which he said leaves time to issue new notices before bills go out.
Real estate groups that opposed the tax welcomed Tuesday’s ruling.
“Today’s decision confirms that the City’s rollout was deeply flawed and failed to provide basic procedural protections for homeowners,” James Whelan, President of the Real Estate Board of New York, said in a statement. “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.”
REBNY is not funding the Staten Island case, according to the group.
The American Real Estate Association said the ruling should prompt the city to halt the surcharge.
“We recognize this decision is subject to a stay, and it is unlikely this Staten Island judge will have the final word,” ARA co-founder Jason Haber said in a statement. “The administration should not spend the next several months defending a process that failed. The entire pied-à-terre tax should be halted.”
Haber said the Legislature should hold hearings on the tax when it reconvenes in January.
It was not clear Tuesday how the ruling affects the Oct. 6 deadline for owners to file exemption applications. In court filings in August, the city said it was sending new notices to more than 11,000 owners based on 2025 state tax data and had extended the deadline to Oct. 6 from Sept. 18, according to the Times. The city said it had approved about 4,700 proofs of residency as of Sept. 16.
Mastro said about 7,000 of the original 17,000 recipients had been told they did not owe the tax or had completed exemption applications by the time of an Aug. 31 hearing. Under the ruling, the city must make that determination itself before notifying owners, he said.
State lawmakers passed the surcharge in May as part of the 2026-27 budget. Gov. Kathy Hochul proposed the tax and Mayor Zohran Mamdani backed it, and it was expected to raise about $500 million a year for city services, according to the Times. It applies to condos and co-ops valued by the Finance Department at $1 million or more and to one- to three-family homes valued at more than $5 million that are not the owner’s primary residence.
Constitutional challenges
Hours before the ruling, a separate group of homeowners and a New York City co-op filed a complaint against the state of New York seeking to overturn the tax. Mastro and Dechert LLP also represent those plaintiffs.
REBNY is paying for the lawsuit, according to the group.
“This lawsuit raises serious constitutional questions, but it also highlights broader concerns about a policy that has been marked by confusion, administrative challenges, and unintended consequences,” Whelan said in a separate statement. “Rather than being narrowly focused on its intended targets, the tax is affecting New Yorkers it was never intended to reach.”
Mastro said the timing of the ruling and the new filing was a coincidence.
“They are very different lawsuits, different plaintiffs, different defendants, different substance,” he said.
The complaint alleges the surcharge discriminates against nonresidents, applies retroactively and violates the Privileges and Immunities Clause, the Dormant Commerce Clause, the Due Process Clause, the Equal Protection Clauses of the U.S. and New York constitutions and the Contracts Clause. It also argues the tax breaches state constitutional limits on real estate tax revenue and the home rule process for laws aimed at a single city.
The plaintiffs include buyers and sellers caught by the law’s Jan. 5, 2026 taxable-status date, Mastro said. One client, a city resident, bought a property from an estate in February and now owes the surcharge because of who owned it on Jan. 5, he said. Another client, former Landmarks Preservation Commission Chair Kent Barwick, moved upstate and faces a tax bill five times his current one on a co-op he bought 50 years ago, according to Mastro. The complaint also alleges co-op buildings could be held liable for surcharges tied to individual shareholders.
The filing follows a lawsuit filed Monday by Wilbur Ross and Hilary Geary Ross and Steve Wynn, who all live in Florida and own property in the city. The former U.S. commerce secretary and the casino executive argue the tax is unconstitutional because it targets only people who live outside the city, Bloomberg reported. Mastro said he does not represent them.
The mayor’s office did not immediately respond to requests for comment.
Gov. Kathy Hochul’s office did not immediately respond to requests for comment.
What it means for agents
Attorneys advising owners and co-op boards said the tax is changing how deals are structured.
Andrew Freedland, co-chair of the co-op and condo practice at Herrick, told Inman in August that he has written contract provisions that split the surcharge between buyer and seller based on the number of days each owns the unit during the July-to-June tax year, with the split settled with a check or a credit at closing.
“Allocate it the way you would allocate anything else based on the number of days each party owns,” Freedland said.
Co-op boards have asked him whether to amend proprietary leases or hold escrows from sellers whose units may owe the surcharge, Freedland said. He said the city can seek the tax years after a sale, which could leave a co-op responsible for a former owner it can no longer reach.
Owners moving units into the rental market will not avoid the surcharge for the current year because residency is set as of Jan. 5, Freedland said, though a qualifying lease can exempt the unit going forward. Mark Limardo, a tax partner at Herrick, told Inman in August that short-term rentals such as Airbnb likely will not qualify, since the exemption requires a one-year lease at fair market rent.
