On August 10, 2026, New York State Supreme Court Justice Wayne M. Ozzi issued a temporary restraining order limiting New York City’s current implementation of the newly enacted surcharge on certain high-value residential properties that do not serve as a primary residence, colloquially known as the “pied-à-terre tax”.
The ruling in O’Brien v. City of New York is significant, but its scope should not be overstated. The court did not invalidate the tax itself. The law remains in effect. The current litigation instead challenges the manner in which the New York City Department of Finance (“DOF”) has implemented the law, particularly its publication of a supplemental assessment roll and its issuance of approximately 17,000 notices to property owners.
Understanding the Tax
As we highlighted in our client alert available HERE, the surcharge applies to certain high-value residential properties that do not serve as a primary residence.
DOF subsequently adopted rules for implementation and, in July, mailed notices to approximately 17,000 property owners whose properties it determined may be subject to the surcharge. The City initially established an August deadline for administrative challenges, which it later extended by emergency rule to September 18, 2026. Our client alert on what to do after receiving a notice is available HERE.
DOF also published a supplemental market-value roll covering a much broader universe of residential properties. According to the City, the roll includes all one-, two- and three-family homes, condominium and cooperative properties, and individual cooperative units in buildings in which at least one unit may be subject to the surcharge. DOF subsequently clarified that the “vast majority” of properties on the roll will not be subject to the surcharge and that only approximately 17,000 owners who received letters were potentially subject to it.
The Lawsuit
Three property owners brought a proceeding challenging the City’s implementation of the law, rather than the law itself.
Their challenge focuses on two principal actions: the publication of the supplemental roll containing information concerning more than 900,000 properties, and the notices sent to approximately 17,000 owners stating that their properties “may be subject” to the surcharge.
The plaintiffs contend that both actions exceed DOF’s statutory authority and are not in accordance with the process established by the legislature.
The Property Owners’ Arguments
The plaintiffs’ primary argument concerns the statutory requirement that DOF make an “initial determination” that a covered property is not a primary residence.
According to the plaintiffs, New York Tax Law § 1352 requires DOF first to use information available to it—including State tax records—to determine that a particular property is not a primary residence. Only after making that determination, they argue, may DOF notify the owner and require the owner to submit evidence challenging the determination.
The plaintiffs characterize the City’s process as an impermissible burden shift. In their view, DOF did not actually determine that each of the 17,000 properties was a non-primary residence. Instead, the notices said the properties “may be subject” to the surcharge and effectively required owners to establish that they qualified for an “exemption.” The plaintiffs argue that primary residences are not “exempt” from the tax—they are outside the statutory definition of property subject to the tax in the first place.
The plaintiff’s also attack the supplemental roll. According to the plaintiffs, publishing information concerning more than 900,000 properties as being “related to” a surcharge that will apply to only a small fraction of them was arbitrary and misleading. They argue that DOF’s own rules create tension because those rules address assessment rolls in connection with notice of the surcharge, while DOF subsequently advised the public that inclusion on the supplemental roll did not mean that an owner was potentially liable.
The plaintiffs contend that owners face unrecoverable compliance costs, disclosure of property information in a highly publicized surcharge-specific context, uncertainty over their tax obligations, and the prospect of penalties if they fail to respond. They maintain that those harms cannot adequately be remedied after the fact.
Finally, the plaintiffs request that the City’s actions to date be considered without legal effect because they City failed to make the individualized determination that, in plaintiffs’ view, the statute requires.
The City’s Arguments
The City disputes both the statutory interpretation and the need for emergency relief.
First, the City argues that publication of the supplemental roll is expressly contemplated by the statutory scheme. The City points to Administrative Code § 11-3205 and related provisions requiring books containing phase-one market values of covered properties to be made available for public inspection. Because the surcharge legislation was enacted after the ordinary assessment-roll process had occurred, DOF says a supplemental roll was necessary for FY 2027.
The City also emphasizes that the property information on the supplemental roll was already publicly available through the City’s regular assessment records.
Second, the City rejects the contention that the notices improperly shift the burden of proof. It points out that § 1352 expressly contemplates an initial determination followed by an opportunity for the owner to submit proof of primary residence. The statute permits DOF to require certifications and documentation, after which DOF makes a final determination considering the owner’s submission and other available information.
The City also argues that there was no emergency warranting a temporary restraining order. The September 18 deadline remained nearly six weeks away when the City filed its opposition, and extensions could be granted for good cause. Moreover, the City argues the only plaintiff who actually received one of the challenged notices, Simon Hedley, had already filed an administrative appeal, and DOF approved it. The City therefore argued that his challenge to the deadline was moot and that no plaintiff before the court faced imminent injury from it.
Finally, the City raised substantial public-interest concerns. Thousands of owners had already filed administrative challenges, and enjoining DOF from processing them could actually disadvantage those taxpayers. DOF also maintained that delaying the September 18 deadline could interfere with processing appeals before surcharge bills are scheduled to be mailed on November 15. The City separately warned that the requested relief could interfere with collection of as much as $500 million in revenue.
What the Court Did
Pending further proceedings, the order temporarily restrains the City from:
- Continuing to post or otherwise provide public access to the supplemental roll listing the names, addresses and property values of more than 900,000 homeowners;
- Taking further action based on the supplemental roll or mailed notices to impose, assess or collect the surcharge without first making the individualized determination and providing the notice required by Tax Law §§ 1351(i) and 1352(a)(2); and
- Enforcing the September 18 deadline against petitioners or other homeowners who received a mailed notice.
A return hearing is scheduled for August 31, 2026.
Importantly, the court has not invalidated the tax. Accordingly, property owners should not interpret the Court’s decision as eliminating the surcharge or assume that they will ultimately have no filing, documentation, or payment obligations. Depending on the outcome of the litigation, DOF may be permitted to resume its existing process, may be required to modify that process, or may ultimately be required to make more individualized determinations before proceeding against particular owners.
What Property Owners Should Do Now
Owners who received a DOF surcharge notice should preserve the notice and assemble documentation establishing primary-residence status. Given the preliminary nature of the order, owners should not assume that the September 18 date or another deadline established following further proceedings will permanently disappear.
For now, the pied-à-terre tax remains the law, while the City’s present procedures for implementing and enforcing it are subject to further judicial review.
The foregoing is not intended to be comprehensive nor constitute legal advice. If you would like to discuss your specific circumstances or would like more information, feel free to contact us at (212) 625-8505.