A group of aggrieved New York City homeowners are suing to delay Mayor Zohran Mamdani's looming pied-à-terre tax, an early legal challenge to the new surcharge that took effect about a month ago.
The lawsuit isn't arguing against the tax as a whole. Rather, the suit argues the law has to date been improperly executed. It alleges the Department of Finance hasn't done proper due diligence to identify owners of luxury pieds-à-terre. Instead, the suit claims, the city is illegally placing the onus on property owners to prove that they don't owe the tax rather than forcing city officials to verify that for themselves.
State law requires the Department of Finance to make an "initial determination" of who is subject to the pied-à-terre tax "based on information available" such as tax returns, property assessments and other official records. The lawsuit claims that the city rushed the process and misidentified a number of longtime New Yorkers as a result, putting "homeowners in an untenable position in the dead of summer."
The Mamdani administration didn't immediately respond to a request for comment.
The new pied-à-terre tax applies to homes worth $5 million or more where the owner isn't a primary resident of New York City. Mamdani has touted the tax as proof that he is delivering on his campaign promise to tax the rich in order to fund his agenda.
The tax went into effect on July 1 and since then, the rollout has been messy. Some New Yorkers say they were falsely deemed pied-à-terre owners despite having lived in their residences for years or decades.
The 23-page lawsuit was filed in New York state court, on behalf of three such homeowners -- Rachel O'Brien, Carmine Morano and Simon Hedley. They say they were wrongly targeted by the tax and are now scrambling to prove to the city that they live there.
"The rollout of this surcharge is a debacle," said Randy Mastro, a lawyer for the plaintiffs who also brought the lawsuit against Mamdani's rent freeze earlier this summer. "It tried to switch the burden to New York City homeowners to prove they live here."
Mastro, who served as a deputy mayor under Mayor Eric Adams, said that in its attempt to identify the luxury pieds-à-terre in the city, the Department of Finance cast too wide a net. That has flipped the responsibility of proving who owes the tax onto the property owners themselves, rather than the city officials in charge, he said.
Last month, the Department of Finance published a preliminary tax roll with 960,000 properties it said may be subject to the second-home tax. Mamdani's office said that this list was just a starting point and was far more encompassing than who would ultimately face the tax. The lawsuit claims that this tax roll "caused mass confusion among homeowners."
The Department of Finance also mailed warning notices to a narrower group of about 17,000 homeowners that it thinks may owe the tax. City officials have until Aug. 30 to notify potential second homeowners of their new tax bills. Speeding up the process, the lawsuit claims, made it harder for the Department of Finance to consider all the available information to properly confirm who owes the tax.
The plaintiffs are asking the court to delay the tax rollout and force the city to redo the process. They want the Department of Finance to annul the tax roll of 960,000 properties and void the pied-à-terre tax warning letters that were already sent out.
Those who received that so-called You may be subject to... letter have until Sept. 18 to appeal to the city or apply for an exemption. That is about a month later than the initial deadline. Mamdani decided to give homeowners more time after a series of complaints about the tax rollout.
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