Mamdani Admin Defends Pied-à-terre Tax Rollout In Court

Mayor Zohran Mamdani’s tax on second homes in New York City received a Staten Island welcome on Monday, when lawyers representing the administration squared off with homeowners’ attorneys in court over the messy rollout of the surcharge.

Judge Wayne Ozzi signaled openness to arguments that underpinned his prior temporary restraining order that briefly halted the implementation of the tax on homes valued at more than $5 million. The order was later stayed, pending an appeal from the administration.

The judge appeared receptive to homeowners’ claims that they were wrongly included in a published list of more than 900,000 properties and sent letters of potential eligibility in error, but weighed the question of whether they were harmed in the process.

Since the suit was filed earlier this month, the deadline to file for exemptions has been extended twice, with the final day to contest the Department of Finance’s determinations of eligibility now set for Oct. 6. Homeowners had initiated 10,871 exemption applications and completed 5,874 out of those, with the administration approving 3,655 exemptions as of Aug. 28, according to a City Hall spokesperson.

Mamdani’s administration has taken heat over the imposition of the tax, but ex-Deputy Mayor Randy Mastro, representing the homeowners against the city, largely focused his arguments on the wrongful inclusion of their names on the initial list and their receipt of letters reflecting initial determinations of potential eligibility, which he referred to as “nasty-grams.”

“That’s over 6,750 people who for sure never should have gotten those threatening mail notices mailed in July. That’s 40 percent of the mail notices they sent,” said Mastro. “They didn’t do what the statute required and now they’re backpedaling to try to plug the holes.”

Attorneys for City Hall have acknowledged that none of the petitioners, including Legacy Real Estate’s Kenneth Fishel and Council member Frank Morano’s wife and father, will ultimately be eligible to pay the pied-à-terre tax. Mastro argued that sending letters to a broad swath of homeowners, even those who were primary residents, was an “attempt to ensnare people into having to pay this tax.”

Ozzi also heard arguments from the city’s attorney, Steven Banks, who argued that the case should be dismissed because the administration hasn’t issued any final tax determinations or harmed any homeowners by sending them notification letters or including their names on the initial list. He emphasized that the case was not brought as a class action for all similarly situated homeowners.

“Did you expect when the supplemental roll was published, that it covered 900,000 properties, or just that a small portion of that would be covered properties?” Ozzi asked Banks. “It seems that was just a repeat of the ordinary tax roll, […] what did you expect the public to think about that?”

Representatives from the administration, namely DOF Commissioner Richard Lee, were no-shows at a Council oversight hearing earlier this month regarding the tax rollout. In written testimony, Lee cited the active litigation as a rationale for not appearing before the panel to field questions in person, noting that he had offered to testify after today’s court date, but the Council had declined to postpone the hearing from its originally scheduled Aug. 18 date.

The lawsuit could further complicate the timely implementation of the tax, but is unlikely to entirely undermine it without challenging the constitutionality of the rule itself. Granting any relief requested, including voiding the original letters and supplementary roll and overhauling the initial steps of the rollout, would give homeowners less time to appeal the determinations, Banks warned.

Mastro emphasized the scope of his clients’ case, which doesn’t seek to wipe out the tax entirely, but takes issue with the rollout and the “outrageous” burden of requiring homeowners to exhaust an “exemption process that’s illegal to begin with” to prove their ineligibility.

“Do the homework, do the hard work on the front end, determine who owes the tax and only go to those people,” Mastro said. “Your honor is the one person who stands between the city administration abusing hundreds of thousands of New York homeowners and setting this right.”

After several rounds of rebuttals, Ozzi said he would prioritize a written determination to avoid adding delays to the implementation of the tax.