NY Dirt: Breaking Down Pied-à-terre Tax Mania
It was a banner day for New York second-homeowners.
Two lawsuits are now challenging the city’s recent pied-à-terre tax, which hits New York’s second homes with an additional surcharge. The tax applies to condo and co-op units valued at more than $1 million by the city, as well as one to three family homes worth more than $5 million.
Plus, the Mamdani administration faces a setback in an earlier suit challenging the tax’s implementation. Judge Wayne Ozzi ordered the city to cancel mailed notices related to the tax and take down a controversial property tax roll.
Here’s a breakdown of the news:
The Wynn-Ross suit
The two new lawsuits have similar threads but are somewhat distinct. Both were filed in Suffolk County, on the eastern side of Long Island.
The first new suit was brought by a few prominent names: developer Steve Wynn, former commerce secretary Wilbur Ross and his wife, philanthropist Hilary Geary Ross. They argue that the tax is unconstitutional because it specifically targets non-residents who don’t have voting representation in New York. They also said they already pay property taxes and use fewer city resources than full-time residents.
The Rosses are Florida residents who also own a Manhattan co-op. A city letter told the couple they would face an $83,531 surcharge on the unit since they are not New York residents.
Wynn was told he would face a $183,094 surcharge for his New York property, according to the complaint.
That case names the state as a defendant. It is before Suffolk County judge Frank Tinari, a Republican, who has already ordered oral argument for November 30.
Mastro’s co-op and trust suit
The second suit against the tax was filed by a well-known Mamdani adversary: Dechert attorney and former deputy mayor Randy Mastro. Mastro is the lead attorney on earlier cases challenging the implementation of the tax and the rent freeze championed by Mamdani.
Some of the plaintiffs in this suit simply own second homes in New York and object to the tax. Others are in more complicated circumstances. One plaintiff, the trustee of an estate, bought a Manhattan co-op in April, before the surcharge was introduced. He is a New York City resident who plans on making the co-op his primary residence after renovations are completed, but is being hit with the tax because it wasn’t a primary residence in January, according to the complaint.
One couple in the case sold their Manhattan pied-à-terre in July. But because the tax targets those who owned second homes in January, they are being hit with a nearly $49,000 surcharge bill.
Another plaintiff is a cooperative corporation responsible for administering the tax with shareholders.
This case names the state as a defendant. It was filed in Suffolk County but as of this writing has not been assigned to a judge.
A win for plaintiffs in the implementation suit
Finally, a Staten Island judge sided with plaintiffs who complained about the rollout of the tax specifically. The Department of Finance unfairly shifted the burden of figuring out who is subject to the tax to homeowners themselves, he wrote, who were faced with proving their residency. The mailed notices meant that homeowners had to expend time and money to prove they were city residents, and risk revealing their tax return data.
The judge ordered that the city cancel the mailed notices and remove the surcharge-specific property tax roll from the city’s website.
Matt Rauschenbach, a spokesperson for the mayor, said the city will fight the order.
“Today’s decision is wrong, and we will invoke a stay of the injunction,” he said in a statement. “With a stay, we will continue implementing the surcharge fairly, efficiently and in full compliance with the law, as we have since day one.”
The stakes for the city are high in each case. Not only has the pied-à-terre tax become a major piece of the Mamdani agenda, but it was also put forth as a way out of a city budget hole.
What we’re thinking about: Lots of pied-à-terre tax news today, but I personally am still thinking about my colleague Caroline Spivack’s story on how the pied-à-terre tax is affecting high-net-worth divorces. Read more here.
A thing we’ve learned: Tuxedo, New York, the site of the New York Renaissance Faire, is believed to have lent its name to the formal jacket, not the other way around.
Elsewhere…
— Mayor Zohran Mamdani Tuesday released a municipal strategy to combat antisemitism, according to a press release. The plan includes $6.4 million for hate crime prevention and survivor support, along with $1 million to strengthen physical security of synagogues and other houses of worship.
— The mayor’s office has the final say when deploying a controversial NYPD protest response unit, Politico reports, citing information from the NYPD. As a candidate, the mayor planned to disband the Strategic Response Group, which has been criticized for heavy-handed tactics. But just last week the group placed several Mamdani allies in handcuffs for protesting Israeli Prime Minister Benjamin Netanyahu.
— The Economic Development Corporation is considering raising one-way fares on the city’s ferry system to $5, up from $4.50, The City Reporter reports. The fares were once just $2.75, equal to a subway ride at the time.
Closing time
Residential: The most expensive residential sale recorded Tuesday was $7.25 million for a 4,157-square-foot condominium at 60 Warren Street in Tribeca. Claudia Saez-Fromm and Mark Fromm with Douglas Elliman had the listing.
Commercial: The most expensive commercial transaction was $75.8 million for 16-37 Woodbine Street, 54-31 Myrtle Avenue, and 3-36, 3-50 St. Nicholas Avenue in Ridgewood. Entities tied to Arch Companies and AB Capstone sold the portfolio to Daryl Hagler.
New to the Market: The highest price for a residential property hitting the market is $16 million for a 10,270-square-foot townhouse at 51 East 67th Street in Lenox Hill. Peter Ocean with Serhant has the listing.
Breaking Ground: The largest new building permit filed was for a proposed 15,133-square-foot, three-family home at 8741-8745 Bay 16th Street in Bath Beach. Zhao Xiaohong filed the permit on behalf of Kate Peiyu Lei.
— Matthew Elo
