The notices New York City sent to about 17,000 property owners will stand after the city won its pied-à-terre tax appeal on Wednesday.
A state court threw out an order that told the city to restart the controversial rollout.
The Appellate Division, Second Department, reversed a Sept. 29 judgment by Richmond County Supreme Court Justice Wayne Ozzi and dismissed the case, ruling the homeowners lacked standing because they had not shown a concrete injury, according to the decision. All four justices on the panel concurred.
The case challenged how the city carried out the non-primary residence surcharge, known as the pied-à-terre tax, and the decision noted the state law creating it was not challenged. Two separate lawsuits seeking to overturn the tax remain pending, The New York Times reported.
“Today, an appeals court rejected an attempt by the ultrawealthy to avoid paying their fair share and ruled in favor of the City in a lawsuit challenging the rollout of the pied-à-terre surcharge,” Mayor Zohran Mamdani said in a statement.
Five of the seven homeowners named in the decision received notices from the city, and all five were exempted from the surcharge after the case was filed, according to the decision. The other two did not claim to have received a notice.
The American Real Estate Association, which opposes the tax, criticized the city and state over the rollout.
Jason Haber | Compass
“Today’s ruling was not a surprise,” ARA co-founder Jason Haber told Inman. “The only surprise in the pied-à-terre tax came when thousands of New Yorkers opened their mail and found themselves guilty until proven resident. The botched implementation and the rushed process behind it have created confusion and chaos. Both Albany and City Hall have failed New Yorkers.”
Panel finds no concrete injury
The homeowners challenged the Department of Finance’s July publication of a list with about 900,000 owner names and its notices to about 17,000 property owners. The panel wrote that confusion over the list is too generalized to qualify as an injury and that the city’s public assessment rolls contain much of the same information.
Receiving a notice did not qualify as an injury because it “serves an informational purpose,” the panel wrote. It also rejected the argument that the cost of seeking an exemption caused harm, writing that all taxpayers spend time and money on compliance and that the homeowners had not documented their costs.
The panel did not decide whether the department acted arbitrarily in the tax data it used to select notice recipients, writing that the homeowners needed to show a harm different from that of the public at large.
Constitutional challenges remain
The tax applies to New York City homes worth $5 million or more and to co-ops and condos worth $1 million or more that do not serve as the owner’s primary residence. Gov. Kathy Hochul — who won re-election on Tuesday night — and Mamdani projected it would generate $500 million a year.
The two pending lawsuits argue the tax violates state constitutional limits on city real estate taxes and discriminates against out-of-state residents, according to the Times. Former Commerce Secretary Wilbur Ross, Hilary Geary Ross and casino mogul Steve Wynn brought one, and the corporation that owns the Montclair, an Upper East Side co-op building, and a group of homeowners brought the other.
“We are heartened by the Appellate Division’s ruling in the City’s favor, and we will continue working with our partners in Albany to defend this law against the ongoing challenges in Suffolk County — brought by some of the same uberwealthy interests whose arguments just lost in court today,” Mamdani said.
