New York Court Vacates Pied-à-Terre Tax Notices And Requires City To Restart Property Owner Review

On September 29, a New York court temporarily stayed implementation of New York City's pied-à-terre tax.

In the order, O'Brien v. The City of New York, a New York judge sided with homeowners to delay the implementation of New York's pied-à-terre tax, saying the notices mailed to homeowners were "arbitrary and capricious, affected by errors of law, and in violation of the recipients' due process rights." The group of homeowners sued the city over its rollout of the tax but did not challenge the legality of the tax itself.

The judge ordered the city to stop the rollout of the pied-à-terre tax and start the entire process over from scratch. The ruling directs the city to remove the existing supplemental assessment roll related to the surcharge and says the city can replace the assessment roll with a limited supplemental assessment roll "reflecting those properties actually subject to the surcharge." The ruling also rescinds notices mailed to property owners in July. It also states that any new notices must explain the rationale for its determination that the owner is subject to the pied-à-terre tax.

The city filed a notice of appeal with the Appellate Division and invoked a stay of the injunction, meaning the rollout will continue while the appeal proceeds. At this point there is no way to know how the appellate court will decide. Additionally, two new lawsuits filed on Tuesday challenge the tax itself, rather than the rollout. We will continue to monitor the litigation and provide updates as developments arise.

Given the uncertainty, we recommend that everyone who received a notice continue through the process of filing for an exemption until we receive further guidance from the courts and/or the New York City Department of Finance.