NYC Homeowners Sue Over Pied a Terre Tax Notices

New York City homeowners filed a lawsuit on Friday against the city and Mayor Zohran Mamdani, challenging the implementation of the "pied-à-terre" tax on high-value homes. The lawsuit does not contest the existence of the tax itself but rather its application, with the plaintiffs asserting that the rollout incorrectly included thousands of primary residences that should be exempt from the surcharge. Mayor Mamdani had previously advised owners of second homes valued at $5 million or more to anticipate receiving tax notices. However, the city later extended the deadline for property owners to submit proof of primary residency to mid-September, citing the prevalence of summer travel among affluent homeowners. Ian Slater, chief executive and co-founder of Trover Partners, described the situation to HousingWire TBD, stating, "We brokers were running around checking people’s mail trying to get the notices." This legal action represents the second significant lawsuit filed against a recent initiative by the Mamdani administration; landlords had previously sued the city over the Rent Guidelines Board's decision to freeze rents on approximately 1 million stabilized apartments. Both lawsuits share a common legal representative, Randy Mastro, who is co-counsel in the rent freeze case and is representing the homeowners in the tax dispute. Mastro previously served as deputy mayor under former Mayor Eric Adams. Mayor Mamdani, who was elected on a platform focused on improving housing affordability, took office facing an existing lawsuit challenging New York's statewide rent-stabilization law enacted in 2019. The pied-à-terre surcharge was established by the city to address a budget deficit. It is designed to apply to non-primary residences exceeding specific value thresholds: $5 million for one- to three-family homes and $1 million for cooperative apartments and condominiums. State law mandates that the Department of Finance must first confirm a property is not a primary residence, utilizing existing agency records. Despite this, the department issued notices to roughly 17,000 homeowners, indicating their properties "may be subject" to the surcharge and requiring them to apply for an exemption by providing proof of residency. Homeowners and real estate brokers have expressed concerns about the confusion and administrative burden caused by this process, particularly the requirement for owners to actively prove their primary residency after receiving a notice that their home might be subject to the tax.